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Title:Sebi may soon allow ecommerce companies to sell mutual funds online

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MUMBAI: You could soon buy into schemes of a Franklin Templeton or ICICI Prudential mutual fund just the way you purchase a Samsung mobile or a pair of Nike shoes online, that too at half the fee you pay to a distributor now.

Markets regulator Securities and Exchange Board of India (Sebi) is in the last lap of finalising guidelines for the sale of mutual funds on ecommerce platforms, which would allow Flipkart, Snapdeal and a host of other online marketplaces to hawk financial products which have so far been the domain of brokers and banks, people familiar with the move said. This could be rolled out as early as January, one of them said, but another source said it could take some more time. Sebi chief UK Sinha met Nandan Nilekani, the former Aadhaar project boss who heads a committee set up by the regulator to suggest steps to reduce cost structure of mutual funds, as well as representatives of ecommerce companies such as Flipkart, Scripbox, FundsIndia.com and Paisabazar.com in Bengaluru last month to discuss the plan, the people said.

Sebi, Flipkart and Snapdeal didn't respond until press time to emails sent on Monday seeking comment.

Details are still being worked out, but Sebi is likely to allow the sale of only balanced and exchange-traded funds on the ecommerce platforms initially as it wants to gauge customer response first, the people ET spoke to said. The commission attached to mutual fund products for ecommerce companies is expected to be around 0.5 per cent.

Currently, investors can buy mutual funds directly from fund houses without paying any commission or through third-party distributors and financial advisers, who charge a fee of up to 1 per cent. While the plan would make it cheaper to purchase from the ecommerce platforms than from intermediaries, Sebi is working also on other steps to make the process hassle-free.

It will make the KYC (know your customer) process and digital transactions simpler and inexpensive as these are a hurdle to online sale of financial products, the sources said. The plan is to allow Aadhaar-linked digital KYC, which the central bank and Sebi have been considering for some time but has yet to be implemented. Mis-selling provisions, which are in place to prevent agents and distributors from misleading unsuspecting customers about the characteristics of products, too are unlikely to come in the way of fund sales through ecommerce platforms, they said.

The regulator is coming up with the plan at a time when ecommerce is making tremendous strides in India, with people from small towns to metros increasingly logging on to Flipkart, Snapdeal, Amazon and other platforms to purchase everything from groceries to mobiles, TVs, cars and even homes. With increasing Internet coverage and awareness, using these online platforms will likely help fund houses to penetrate more markets in small cities and towns at lower costs. If the experiment is a success, the ecommerce model could be employed for selling more financial products as well.

Fund houses and some intermediaries already sell schemes online, but the documentation process is done physically, which adds to their cost.

The proposed steps will reduce the cost of selling schemes, said Srikanth Meenakshi, cofounder of online investment service platform FundsIndia.com that distributes mutual funds. "We incur quite a lot of costs to conduct KYC — sending people to their houses to pick up forms and photographs, etc. Now, with this, we will be able to get rid of all these costs," he said. "Digital way of doing KYC will make it very easy to onboard a customer...We will be able to do everything that an online commerce player does plus more."


Some online financial services entities that already sell regular fund products online are sceptical about allowing mainstream ecommerce players into the space. "They have been successful online distribution players. They have been a distribution platform no doubt, but they have been physical distribution platforms. They have to build a separate business model (to sell financial products)," said Dinesh Rohira, CEO of 5nance.com.

FundsIndia.com's Meenakshi, however, expects the move to help firms like his. "We have built scale. If we get much more customers, even if our per-customer revenue comes down, the ability to get more customers is always enticing than the loss of per-unit transaction," he said.

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