In its Wednesday's meet, the capital market watchdog SEBI decided that even sponsors who do not meet the profitability criteria can apply for mutual fund or AMC licenses. And this will facilitate fintechs looking to foray into the mutual fund space to apply for MF license, said the CEO of a fund house on anonymity.
Nonetheless the fintech will need to display the presence of a net worth of Rs. 100 crore in the mutual funds, till it logs five years of continued profitability.
Relaxation for fintechs to foray into AMC business
In a usual scenario, to get into the fund management business, as per SEBI guidelines, there is a requirement of profitability track-record of the sponsor as well as a minimum net worth of Rs. 50 crore.
The SEBI's statement said that the move is aimed to "facilitate innovation and enhanced reach to more investors at a faster pace, including tech-enabled solutions."
Intermediaries are of the view that new fintechs will not be able to compete with other MFs unless they are able to differentiate. "There are 40-plus fund houses in the industry.
While a fintech company entering the fund management business could quickly capture assets through its own distribution arm, it would need to back it up with performance and differentiation to get a strong foothold in the industry," says Rushabh Desai, MF distributor.
Fintech companies that distribute mutual funds include Paytm, Groww, Zerodha and Kuvera. Also Sachin Bansal, former cofounder of Flipkart is in the process of acquiring Essel Mutual fund.
Also companies like Bajaj Finserv, Samco Securities and NJ India are awaiting final nod from SEBI for their application after receiving in-principle approval from the market watchdog.