K.R. Srivats

New Delhi, Dec. 20

THE Finance Ministry has set the record straight on the issue of allowing mutual funds to offer an open-ended equity-linked savings plan under the Equity Linked Savings Scheme 2005.

It has now amended the ELSS 2005 to specify that a mutual fund or the Unit Trust may, at their discretion, operate "one open-ended equity linked savings plan" with prior approval of SEBI.

"We have gone back to whatever position that existed prior to ELSS 2005. There is now no prohibition or barring of mutual funds from offering open-ended equity-linked savings plan. We have not changed the rules of the game," official sources said.

Meanwhile, informed sources, however, said the latest amendment may bring to the fore certain ambiguity on the status of a fund house that already operates more than one ELSS plan.

After ELSS 2005 was unveiled in November, the market was abuzz with concerns that the Finance Ministry had barred mutual funds from offering open-ended equity-linked savings plan and that only close-ended plans alone would be permitted under the scheme.

This is because the ELSS 2005 announced in November did not specifically provide that mutual funds could operate open-ended plans under this scheme. In 1992, only close-ended ELSS plans were permitted. This position was amended in 1998, when open-ended plans were permitted.

(This article was published in the Business Line print edition dated December 21, 2005)
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