The Hindu Business Line : MFs get a breather on rural branches

THE Finance Ministry has for the time being decided against introduction of any regulatory norms that would require fund houses in the country to set up a mandatory number of rural or semi-urban branches.

Faced with a situation of low penetration of mutual funds in rural areas, the Finance Ministry was toying with the idea of stipulating a minimum number of branches to be set up by fund houses in rural areas. The regulatory intent was on the lines of those already specified in the banking sector.

"We are now not pursuing the idea of laying down regulations that would require fund houses to set up minimum number of branches in rural areas of the country," a senior Finance Ministry official told Business Line here.

The Finance Ministry had in the past highlighted that the penetration in rural areas is relatively lower with 13.7 per cent of urban households owning mutual funds as against only 3.8 per cent of rural households. There was a demand for a complete transformation in the business approach of mutual funds if they were to be an effective medium to mobilise national savings to achieve the GDP growth targets laid down in the Tenth Five-Year plan.

Some of the fund houses, however, maintained that there is no need for a regulatory fiat to increase penetration in rural areas.

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