SBI MF calls for strengthening fixed income market
Higher financialisation of savings is a key to support India’s economic growth aspiration
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Visakhapatnam: A top executive of a State Bank of India Mutual Fund has called for strengthening the fixed income market and encouraging savings in a big way.
DP Singh, Deputy Managing Director and Chief Business Officer, SBI MF in an exclusive chat with Bizz Buzz on budget expectations from the fast growing mutual fund market, said higher financialisation of savings is a key to support India's economic growth aspirations.
"Broadly speaking, the steps to be considered in this direction can include enhancing retail participation to deepen capital markets. The enhanced retail participation from the last few years has made the Indian equity markets relatively more resilient as compared to the past," he stated. Singh felt that going forward the Indian fixed income market also needs similar strengthening. Introducing a Debt Linked Savings Scheme on the lines of the Equity Linked Savings Scheme will nudge more retail participation in the fixed income space.
On the need for incentivising financialisation of savings, he said the next leg in this journey will be mass adoption of financial savings instruments. For this to happen, the incentives to move savings from low-return fixed assets to financial assets should be rightfully aligned. One of the low hanging fruits in this area is increasing the attractiveness of capital markets through tax breaks.
Batting for bringing parity in tax treatment of different financial products, he said at present, the capital gains arising out of investments in different financial products are treated differently for taxation purposes. In fact, different financial products investing in the same asset classes also are treated differently, thereby causing tax arbitrage in favor of some products.
Hence, he opined, there is an urgent need to fix these gaps and bring parity on the taxation front.
On allowing MFs to launch pension-oriented products, he said in just over a decade since 2010, the assets under management by mutual funds have gone up from around Rs 6 lakh crore to almost Rs 40 lakh crore.
A logical next step will be mutual funds being allowed to launch pension-oriented products that get a tax treatment similar to the existing pension products in the country. This will further promote the idea of long-term investing in the country, thereby strengthening the social security of the masses.
