The Hindu Business Line : AMFI focuses on service tax, equity fund index

HERE is an attempt to tell you about some of the initiatives lately taken by AMFI, the association formed by asset management companies in India. These may not concern you, the investor, directly but you may still file the information in your mind for future reference.

To begin with, there are developments concerning several new working groups that were recently formed by the association. These groups were set up to deal with crucial issues as service tax. AMFI had also established a special group to formulate an index for equity funds - a measure that will help in benchmarking the performance of all funds in the category.

The group that was formed to study the provisions of service tax rules was asked to prepare procedural guidelines to be followed by all AMFI members uniformly. Guidelines based on the recommendations of the group have since been issued.

The group on direct tax proposals (outlined in the last Budget) which was formed soon after the introduction of the Finance Bill has also come out with a set of recommendations. Based on the latter, a number of suggestions have been presented to the Government.

Incidentally, as the latest AMFI newsletter points out, each of these groups had invited an outsider to provide expert advice. Tax consultants Kanu Doshi and Shailesh P Seth were part of the groups on direct taxes and service tax. The one on equity fund index had Mr D Thyagarajan, Director - Financial Ratings, Crisil, as its member.

On another front, the mutual funds' body has been made part of the Committee on Gold Exchange Traded Funds, constituted by SEBI. The other members of the committee include representatives of the Finance Ministry and RBI. .

AMFI has also submitted reports to the securities regulator on a couple of vital issues - capital guaranteed products and advertisements. These have been prepared by working groups headed by Mr Naval Bir Kumar of Standard Chartered MF and Mr Ajay Bagga of Kotak Mahindra MF respectively.

The association's newsletter has also referred to some of the trends that have lately emerged in the MF industry. The last fiscal, it has noted, was a "year with a difference", thanks to the number of new schemes that were launched. The year actually saw 97 new products - a record - hitting the market.

The amount mobilised in 2004-05, at more than Rs 25,000 crore, was also a new high. The gross amount collected was about Rs 8.4 lakh crore, an increase of over 40 per cent over the past year. However, the discouraging thing was that the net accretion was a mere Rs 2,154 crore - the lowest in the last five years.

This was mainly due to the net outflow of over Rs 14,000 crore from the income funds and Rs 1,345 crore from gilt funds coupled with a substantially lower net inflow of liquid funds, Rs 10,347 crore as against Rs 24,577 crore last year.

This, AMFI has assessed, is probably "a temporary phenomenon" reflecting the market realities. The scenario may change in the years to come, it is hoped.

Feedback may be sent to nilanjan@thehindu.co.in

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