Stocks

Mutual funds look to lure patrons from rate-slashing banks

Suresh P Iyengar Mumbai | Updated on January 09, 2018

mfs

They offer ‘instant redemption’ facility in their liquid funds to entice investors

The mutual fund industry is gearing up to attract more funds from investors as banks, flush with funds, have been cutting interest rates on savings bank deposits after trimming rates on term deposits.

Last week, the country’s largest public sector bank, SBI, introduced a two-tier rate structure for savings bank deposits.

Rising confidence

With RBI norms providing banks full flexibility to decide on interest rates based on their cost of funds, other banks are expected to similarly lower rates soon.

Swarup Mohanty, CEO, Mirae Mutual Fund, said funds would definitely flow from the banking sector into mutual funds, which have of late gained investors’ confidence.

However, the mutual fund industry should act responsibly and sell products that suits investors’ risk profile, he added. “Ideally, funds from savings bank accounts should flow into liquid schemes, but if a financial advisor sells an equity product to someone who wants to park his savings bank money, it would be disastrous,” he added.

Capitalising on emerging trend, many mutual funds are planning to introduce instant redemption facility in their liquid schemes.

Some of the larger fund houses such as Reliance, DSP BlackRock, SBI, ICICI Prudential and UTI offer instant redemption in their liquid funds. Some of these fund houses, in fact, redeem investors’ money in a matter of minutes by harnessing technology, while others redeem them the next day.

“We are also in talks with a few banks to offer instant redemption in our liquid scheme, but investors should know that this facility comes at a cost,” he said.

Published on August 07, 2017

Follow us on Telegram, Facebook, Twitter, Instagram, YouTube and Linkedin. You can also download our Android App or IOS App.

This article is closed for comments.
Please Email the Editor

You May Also Like