There is already massive disruption in the financial services sector due to the COVID-19 crisis. In particular, the lockdown and restrictions on employee movements have impacted many operations where the human interface is essential. The mutual funds industry finds itself in one such quandary, as the crisis assumes alarming proportions by the day.
The Association of Mutual Funds of India (AMFI) has written to market regulator Securities and Exchange to take note of the practical difficulties their members are facing and listed the relaxations the mutual funds companies are looking for, reported Mint.
In Mumbai, the state government has placed a restriction that only 50% of employees can be allowed to come into office. AMFI has suggested that customers use the registered email for instances that usually required them to hand over physical forms. Other customer-centric activities like KYC, dispatching physical cheques for redemption of units which will also be delayed/hampered. The individual half yearly or monthly accounts statements are prepared by the executives and this will also be impacted as the end of the financial year approaches. Even the declaration of NAV could be disrupted, AMFI says. According to the industry body, they may have to declare a working day as a non-working day due to these constraints.
The request to SEBI by AMFI is that the regulator should relax the various timelines for report submissions and the other compliance norms. SEBI has laid down several rules and regulations for mutual funds to follow including conducting regular board meetings, committee meetings, like the audit committee etc.
The most significant request in this communication is to relax the borrowing limits for mutual fund companies. In this highly volatile situation, many investors may want to redeem their units and the companies may not have sufficient liquidity to honour these requests.
There are other practical implications as well. SEBI mandates that the mutual funds must record all calls received from the dealers. Now, if the operations are moved away from the main place of business, this will not be feasible.
On the redemption side, one suggestion is to allow email-based redemptions with another verification step on the investor’s bank details etc. It is also suggested that redemptions over Rs 2 lakh be stopped looking into the bloodbath happening in the stock exchanges.