Sebi's 'perform or perish' norm will only benefit large players

In the latest informal understanding between market regulator Sebi and fund houses only new fund offers (NFOs) that can rope in substantial investor response will get Sebi’s go ahead.

Mutual funds houses will think twice now, before launching new schemes. C_NBC TV 18_ learnt that an informal agreement between Security and Exchange Board of India (Sebi) and fund houses has been reached, according to which new equity schemes will need to rake in at least Rs 10 crore if they want Sebi approval.

For debt schemes, this minimum corpus was set at Rs 20 crore. Failure to reach these targets will result in a refund to investors within 15-20 days of the NFO’s closing date.

Further, failure to complete refunding process within six weeks will result in an interest payment of 15 percent. Sebi sources told CNBCTV-18 that the move would ensure more transparency and the existance of only serious players. However, fund managers feel the new norms will make it more difficult to attract investors. For small fund houses it means lesser product launches , thereby giving large fund houses with strong distribution networks an undue advantage.

With the new scheme threatening the existence of small players, experts feel the new rule could result in consolidation of schemes, a situation Sebi has been wanting to ensure for a while now.

Watch the full report on CNBC TV 18