InvestorQ : Is it true that SEBI is going to permit digital companies like Phone Pe and Paytm to also float Asset Management Companies in India? How would it help?
diksha shah made post

Is it true that SEBI is going to permit digital companies like Phone Pe and Paytm to also float Asset Management Companies in India? How would it help?

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Dawn Cherian answered.
5 months ago
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Actually, SEBI has used a sort of carrot and stick policy. It has given the Fintechs a carrot by permitting them to float Asset Management Companies to original mutual fund units. At the same time, SEBI has also doubled the net worth requirements for floating AMCs from the current Rs.50 crore to Rs.100 crore. So it is a kind of blow hot and blow cold.

The regulator has certainly paved the way for select Fintech companies and other start-ups to set up AMCs in India. The AMCs are the sponsors that float and manage mutual funds in the Indian context. This move is expected to encourage some of the high profile Fintech outfits like Paytm, PhonePe and Mobikwik to set up mutual fund businesses.

Why would the likes of Paytm and Phone Pe want to set up mutual funds. Most of them are already into financial and broking services and they are using their digital distribution network to sell their broking services and also third party mutual funds. By floating their own AMCs, these Fintechs can also earn the lucrative asset management fees from clients.

From a macro perspective, the entry of Fintechs will open the doors for millions of distributed digital customers across the breadth of India to participate in mutual funds and create wealth in the long term. In the last few months, a number of Fintech firms had shown interest in the domestic mutual fund space and they are already distributing MFs

Some of the AMC statistics are quite stark. While the AMC space has over 40 players, the top 10 funds account for 85% of the total AUM. That needs to change. It is hoped that Fintechs with their vast digital customer base and a predominance of young customers would be able to catalyze the creation and nurturing of a wider customer base.

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