Small city outreach

More than a year after suspending the beyond-top-30 incentives, the capital market regulator SEBI has shelved the decision to revive it, as the industry could not device effective checks and balances to prevent its misuse. Last February, SEBI directed mutual fund companies to keep the small-town linked sop of additional expense ratio in abeyance, citing a lack of a system-driven mechanism to check the abuse of the incentive structure. To promote financial inclusion through increased penetration of mutual funds and in investors interest, SEBI had permitted fund houses an additional expense ratio of 30 basis points on new inflows (up to Rs 2 lakh) from retail investors for encouraging mutual funds garnering funds from B-30 cities and energising the distribution network. Despite discontinuation of the incentive, the inflow from the smaller cities has been very strong due to outreach of the mutual fund industry amid intense competition and hence SEBI is not very keen on re-looking at reviving this sop, said an executive of a leading fund house. Read: Now, hinterland driving AUM rise in MFs Nirav Karkera, Head of…