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Taxpayers have no confidence in MFs
June, 25th 2007

The Indian mutual funds industry may have crossed the Rs 4-lakh-crore mark in assets under management, but still ranks at the bottom of the charts when it comes to gaining the confidence of tax payers.

A study in 2005 by the Asian Development Bank had revealed that, of all the taxpayers in India, only 17% were confident about investing money in mutual funds. Although this study was conducted two years ago, latest data show that these findings are relevant to even 2007.

Public sector banks still remain at the top of the chart with 96% of tax payers expressing confidence in the nationalised banks. This is followed by LIC of India with 83%, regional rural banks 55%, regional co-operative banks 55%, registered co-operative societies 32%, other insurance companies 29% and Indian private sector banks 21%.

UK Sinha, chairman and managing director, UTI Mutual Fund, lists two factors to reason why taxpayers confidence in mutual funds is negligible. One, a lack of investor education programmes and two, monies people receive after retirement are still to make their way into funds.

The industry should take measures like investing for investors education and awareness. Also, the fact that the pension money is not yet allowed to be invested in equities is a major concern, Sinha says. There is also a lack of a level-playing field vis--vis mutual funds and other segments of the financial services sector.

Echoing similar sentiments, Vikrant Gugnani, president, Reliance MF, hopes that the rules will not differ for the segments of the financial sector that includes insurance and banking. Pension reforms are long overdue and we have not grown as fast as we should, he notes.

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