The regulator is of the view that a greater use of Internet as a distribution channel can help increase the penetration of mutual funds, especially among young investors.

Under its new long-term policy for mutual funds, which has been approved by the Sebi board and will soon be made public, the fund houses would be asked "to enhance the online investment facility and tap the Internet savvy users to invest in mutual funds."

The Securities and Exchange Board of India (Sebi) said that online phenomenon is increasing rapidly as more and more people especially younger generation prefers to carry out most of transactions online such as Internet banking, shopping and ticketing.

"This phenomenon brings opportunities for mutual funds to tap this segment of population by offering them an option to invest online using Internet," Sebi said in its draft proposals.

At present, many fund houses are offering facility for online investment, but Sebi said there is a need to promote and make it more user friendly for investors by improving the infrastructure and efficiencies.

"Online distribution not only increases customer convenience, but also significantly improves distributor economics," Sebi said. The regulator would also ask mutual fund players to tap burgeoning mobile-only Internet users for direct distribution of investment products.

According to an estimate, number of Internet-enabled mobile phones in the country is expected to increase from 10-15 millions in 2010 to 300-400 millions in 2015.

PTI