Mutual Funds
It refers to the pooling of savings by a number of investors-small, medium and large. The corpus of fund thus collected becomes sizeable which is managed by a team of investment specialists backed by critical evaluation and supportive data.
A mutual fund makes up for the lack of investor’s knowledge and awareness. It attempts to optimise high return, high safety and high liquidity trade off for maximum of investor’s benefit. It thus aims at providing easy accessibility of media including stock market in country to one and all, especially small investors in rural and urban areas.
Mutual funds are most important among the newer capital market institutions. Several public sector banks and financial institutions set up mutual funds on a tax exempt basis virtually on same footing as the Unit Trust of India (UTI) and have been able to attract strong investor support and have shown significant progress.
Government has now decided to throw open the field to private sector and joint sector mutual funds. At present Securities and Exchange Board of India (SEBI) has authority to lay down guidelines and to supervise and regulate working of mutual funds.
The guidelines issued by the SEBI in January 1991, are related in advertisements and disclosure and reporting requirements etc. The investors have to be informed about the status of their investments in equity, debentures, government securities etc.
The Narasimhan Committee has made the following recommendations regarding mutual funds: (i) creation of an appropriate regulatory framework to promote sound, orderly and competitive growth of mutual fund business: (ii) creation of proper legal framework to govern the establishments and operation of mutual funds (the UTI is governed by a special statute), and (iii) equality of treatment between various mutual funds including the UTI in the area of tax concessions.