Professional Documents
Culture Documents
S.No Particular NO: Customer Awareness About Sbi Mutual Fund
S.No Particular NO: Customer Awareness About Sbi Mutual Fund
TABLE OF CONTENT
1.
EXECUTIVE SUMMARY 03
2.
INTRODUCTION TO BANKING 06
INDUSTRIES
3.
HISTORY OF STATE BANK OF INDIA 07
4.
SBI LIFE INSURANCE 12
5.
INTRODUCTION TO MUTUAL FUND 25
6.
ANALYSIS AND FINDINGS 45
7.
FINDINGS 58
8.
SUGGESTIONS 59
9.
CONCLUSION 60
10.
REFERENCES 61
11.
ANNEXURE 62
EXECUTIVE SUMMARY
INTRODUCTION
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Banking
Industry Insurance
Capital Markets and allied industries
Products Loans, Credit Cards, Savings, Investment vehicles, SBI Life (Insurance) etc.
Website www.statebankofindia.com
My fieldwork involved visiting the people who have invested in mutual funds and
who have not purchased mutual funds and also chartered accountants to know whether they
have invested in mutual funds or not and also the reasons for their investment / non-
investment.
Research Methodology:
For collecting data, I used Questionnaire and interaction with people. The primary
data was collected through interaction with the people I visited, and secondary data was
collected from books, magazines, websites etc..
Sample Frame: People who have invested in mutual funds and who have not invested in
Mutual funds.
Sample size : 100 respondents
Sample Unit :
1. Bank Employees
2. Udyambag entrepreneurs
3. Government employees
4. Stock Dealers in Belgaum city
5. Businessmen.
Sampling Method : Simple random sampling technique.
The difficulty faced during the fieldwork was not getting the appointments of the
respondents since they were very busy and some were non-cooperative. Moreover, time
limitation was there. The data analysis is done by using coding sheet, SPSS software,
statistical techniques etc.
(SBI)) is the largest bank in India. If one measures by the number of branch
offices and employees, SBI is the largest bank in the world. Established in 1806 as bank
of Bengal, it is the oldest commercial bank in the Indian Subcontinent. SBI provides
various domestic, international and NRI products and services, through its vast network
in India and overseas. With an asset base of $126 billion and its reach, it is a regional
banking behemoth. The government nationalized the bank in 1955, with the Reserve bank
of India taking a 60% ownership stake. In recent years the bank has focused on two
priorities, 1), reducing its huge staff through Golden handshake schemes known as the
Voluntary Retirement Scheme, which saw many of its best and brightest defect to the
private sector, and 2), computerizing its operations.
State Bank of India (SBI) is India's largest commercial bank. SBI has a vast
domestic network of over 9000 branches (approximately 14% of all bank branches) and
commands one-fifth of deposits and loans of all scheduled commercial banks in India.
The State Bank Group includes a network of eight banking subsidiaries and several non-
banking subsidiaries offering merchant banking services, fund management, factoring
services, primary dealership in government secure credit cards and insurance.
EVOLUTION OF SBI
The origin of SBI goes back to the first decade of the nineteenth century with the
establishment of the bank of Calcutta in Calcutta on 2 June 1806. Three year later the
bank received its charter and was redesigned as the bank of Bengal (2 January 1809). A
unique institution, it was the first joint stock bank of British India sponsored by the
government of Bengal. The bank of Bombay (15th April 1840) and the bank of madras (I
July 1843) followed by bank of Bengal. These three banks remained at the apex of
modern banking in India till their amalgamation as the imperial bank of India on 27
January 1921.
Primarily Anglo-Indian creation, the three presidency banks came into existence either as
a result of the compulsion of imperial finance or by the felt needs of local European
commerce and were not imposed from outside in an arbitrary manner to modernize
Indias economy. Their evolution was, however
Shaped by ideas culled from similar developments in Europe and England and was
influenced by changes occurring in the structure of both the local trading environment
and those in the relation of the Indian economy to the economy of Europe and the global
economy frame works
Establishments
The establishment of bank of Bengal marked the advent of limited liability, joint stock
banking in India, so was the associated in banking viz the decision to allow the bank of
Bengal to issue notes, which would be accepted goes the payments of public revenues
within a restricted geographical area, this right of note issue was very valuable not only
for the bank of Bengal but also its two siblings, he banks of Bombay and madras, it
meant an accretion to the capital of the bank, a capital on which the proprietors did not
have to pay any interest . The concept of deposit banking was also an innovation because
the practice of accepting money for safe keeping (in some cases even investment on
behalf of the clients) by the indigenous bankers had not spread as a general habit in most
parts of India, but for long time. And especially up to the time. Each charter provided for
a share capital. Four fifth of which were privately subscribed and the rest owned by the
provincial govt the member of the broad director, which managed the affair each bank,
were mostly proprietary directors representing the large European managing agency
house of India. The rest were government nominees, invariably civil servant, one of
whom was elected as the president of the board.
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Offices of the Bank of Bengal
PROFILE
Spreading its arms around the world, the SBIs International Banking Group delivers
the full range of cross-border finance solutions through its four wings the Domestic
division, the Foreign Offices division, the Foreign Department and the International
Services division.
The Domestic wing provides services like merchant banking, shipping finance and
project export finance. The Foreign Offices wing offers the entire range of international
trade and industrial finance products, while the Kolkatta-based Foreign Department
undertakes treasury and currency operations.
The bank has a network of 66 offices/branches in 29 countries spanning all time zones.
The SBIs international presence is supplemented by a group of Overseas and NRI
branches in India and correspondent links with over 522 leading banks of the world.
SBIs offshore joint ventures and subsidiaries enhance its global stature.
The bank has carved a niche for itself in Euroland with branches strategically located in
Paris, Frankfurt and Antwerp. Indian banks and corporates are able to avail single-
window Euro services from SBI Frankfurt.
These strengths are reinforced by a dedicated and highly skilled team of professionals
deployed by the bank in each specific segment.
Mission Statement:
To retain the bank position as the premier Indian Financial Service Group, with world
class standard and significant Global Business committed to excellence in customer,
shareholder and employee satisfaction to play a leading role in the expanding and
diversifying financial service sector, while continuing emphasis on its development
banking role
Vision statement:
Premier Indian Financial Service Group with Global Perspective, world-class
Standard of efficiency and professionalism and core institutional values.
Retain its position in the country as a pioneer in development banking
Maximize shareholders values through high sustained earning per share
An institution with a culture of mutual care and commitment, a satisfying and
exciting work environment and continue learning opportunities.
Core values of the bank:
Excellence in customer service
Profit orientation
Belonging and commitment to the bank
Fairness in all dealing and relations
Objectives of SBI
Improvement in profitable through better management of asset portfolio increased
employee productivity, enhanced support to countrys foreign trade as well as substantial
improvement in the system particularly in the area of training mechanization, customer
service, and internal house keeping etc.
Management strategies
In retail finance, the bank has leveraged its corporate relationships, pursued business
growth selectively, and has not competed based on interest rate. The bank has taken
initiatives like on-line tax returns filing and faster transfer of funds to protect its dominant
position in the government business. The bank also has a clear technology strategy that
will enable it to compete with the new generation private sector banks in customer
service and operational efficiency.
The bank continues to have a high level of gross NPAs at 5.95% of gross advances as at
March 31, 2005, compared with 4.9% for all scheduled commercial banks (SCBs) taken
together. The bank is facing challenges to improve the quality of assets originated, as can
be seen in the consistently higher levels of slippages (additions to NPAs) at 2.71% in
2004-05.
Business description
SBI along with its associate banks offer a wide range of banking products and services
across its different client markets. The bank has entered the market of term lending to
corporate and infrastructure financing, traditionally the domain of the financial
institutions. It has increased its thrust in retail assets in the last two years, and has built a
strong market position in housing loans.
SBI, through its non-banking subsidiaries, offers a host of financial services, viz.,
merchant banking, fund management, factoring, primary dealership, broking, investment
banking and credit cards. SBI has commenced its life insurance business by setting up a
subsidiary, SBI Life Insurance Company Limited, which is a joint venture with Cardiff
S.A., one of the largest insurance companies in France. SBI currently holds 74% equity in
the joint venture.
Industry prospects :
To leverage benefits such as access to low cost resources and the facility to provide a
larger gamut of services, a number of finance companies such as Kotak Mahindra
Finance Limited and HDFC Limited have promoted banks. Simultaneously, yet another
emerging trend is that of foreign banks promoting NBFCs to benefit from regulatory
flexibility available to such entities in areas like absence of statutory liquidity ratio and
cash reserve ratio requirements, priority sector requirements, and corporate exposure
limits.
Our Mission:
SBI Life Insurance is a joint venture between the State bank of India and Cardif
SA of France. SBI Life Insurance is registered with an authorized capital of Rs 1000
crore and a paid up capital of Rs 500 crores. SBI owns 74% of the total capital and Cardif
the remaining 26%. State Bank of India enjoys the largest banking franchise in India.
Along with its 7 Associate Banks, SBI Group has the unrivalled strength of over 14,500
branches across the country, arguably the largest in the world. Cardif is a wholly owned
subsidiary of BNP Paribas, which is the Euro Zones leading Bank. BNP Paribas is one of
the oldest foreign banks with a presence in India dating back to 1860. Cardif is ranked
2nd worldwide in creditors insurance offering protection to over 35 million
policyholders and net income in excess of Euro 1 billion. Cardif has also been a pioneer
in the art of selling insurance products through commercial banks in France and in 35
more countries.
country provides a vibrant base for insurance penetration across every region and
economic strata in the country ensuring true financial inclusion.Agency Channel,
comprising of the most productive force of more than 25,000 Insurance Advisors, offers
door to door insurance solutions to customers.
Customer Satisfaction - many of our customers who have bought an insurance policy
with us have bought a second one Financially sound with over a 100 years of Banking
experience, when you trusted us with your money, why would you trust somebody else
with your protection needs.
Individual product:
Unit Linked Plans: It may be difficult to understand all your needs but as your preferred
life insurance company, SBI Life definitely understands all your financial & insurance
needs. Unit linked Plans are an attempt to meet all your financial & insurance needs
through a single non participating product. Whats more you get market linked returns
which in the long term has always proved to give better returns than traditional savings
products. We offer the following plans under this category.
Horizon II
Unit Plus II
Pension Plans: Life expectancy is improving rapidly. People live longer. You cannot work
throughout your life. You will have to retire from work. In the post retirement period you
have lot of time for yourself. You would like to do things you have not done while you
were working. You need to have a comprehensive plan to meet our post retirement
financial needs ensuring complete peace of mind.
Horizon II Pension
Pure Protection Plans: There are times when everything seems to be perfect, but who can
predict future and there is always a place to make this world a better place for our loved
ones. To ensure that these uncertainties do not shatter the dreams you have for your
family, SBI life offers you.
Shield
Swadhan
Keyman
Protection cum Savings (Endowment) Plans: SBI Life offers a variety of plans that gives
you the benefit of protection and the opportunity to save for various events like purchase
of new house, wedding, car etc. we assist your savings.
Sudarshan
Scholar II
Setubandhan
Money Back Plans: As an individual your life is fueled by dreams. You experience
different special moments in life like wedding, birth of a child, childs education or
purchasing a new home. You have to be financially prepared for these special moments.
What you need is easy liquidity at regular intervals with life insurance protection take
Care of these special moments.
Money Back
Sanjeevan Supreme
HORIZON II
Introduction:
SBI Lifes HORIZON II is a unique, non participating Unit Linked Insurance Plan
in Indian Insurance Industry, where you need not to be a financial market expert. This
plan offers the flexibility of Unit Linked Plan along with Automatic Asset Allocation
which provides relatively higher returns on your money where as increasing death
benefits provides higher security to your family.
Key features:
Twin benefit of insurance cover and market linked returns
Tax benefit as per section 80C and 10(10D) of income tax act.
15 days free look period from the date on which you receive the policy document.
Benefits:
Hassle Free Investment Management: You simply invest we will manage it for you.
Maturity Benefits: At the end of the term you will get the fund value.
Increasing Death Benefit: For all in forced policies , In case of death after completion of
age 7.
Key features:
Pay Premium for a limited period and reap benefits over a long time.
Flexible plan which adapts to your changing needs as and when you want.
PENSION PRODUCT
HORIZON II PENSION
Horizon II Pension is the most simple unit linked pension plan; all you need to do is:
Choose your retirement date, the plan option and the regular premium amount.
Based on the plan option and the term opted, SBI Life will invest your money in
three different funds viz., Equity Pension Fund, Bond Pension Fund and Money
Market Pension Fund.
The funds are invested keeping in mind the term opted for and your money is
invested in safer funds as your policy approaches maturity.
Pure Pension
Pension cum Life Cover
Introduction:
We at SBI Life understand the basic needs for pension plan and give you financial
strength to maintain your life style even after the retirement. Unit Plus II Pension plan
makes sure that you have regular income after you retire and also helps you to maintain
your standard of living. This is a unit linked pension plan wherein the policyholder
chooses an investment period from 5 to 52 years for a vesting age between 50 to 70 years.
You can choose to pay either single premium or pay regular premium for the entire policy
term. Your contributions are invested into 4 fund options as per your choice.
Key Features:
Choice to invest & control four different funds as per your risk appetite.
Pure Pension
Pension cum Life Cover
Key features:
Benefits:
Tax benefit
Maturity benefit
Death benefit
Swadhan
Introduction
Happiness and security for your family is what you want. However life has its
uncertainties and risks. All that youre interested in is how best to afford a secure future
for your loved one. Have you ever wished for a low premium insurance policy that not
only provides security to your loved ones but also returns back the premium paid.
Level Premium throughout the chosen term with increasing Sum Assured,
depending on the option chosen.
Tax benefit u/s 80 C and 10 (10 D) of IT Act
Schlor II
Introduction
As a caring parent you would always want your child to get the very best. Is there a way
to protect your children against lifes risks? Is there a way to make tomorrow safe for
them? Therefore this is the time when careful financial planning can help you fulfill the
aspirations that you have for your childrens. We at SBI Life can help you ensure that
your childrens future is secure and prosperous. Schlor II is designed to protect your
childs future educational needs.
Key features
We at SBI Life can help you ensure that your childrens future is secure and
prosperous. The uncertainties if life.
We at SBI Life can help you ensure that your childrens future is secure and
prosperous. Installments.
Money back:
Introduction
As an individual your life is fueled by dreams. You experience different special moments
in life like wedding, birth of a child, childs education or purchasing a new home. You
have to be financially prepared for these special moments. What you need is easy
liquidity at regular intervals with life insurance protection to take care of these special
moments.
Key features
The plan has a number of money back options specially suited to your needs
In addition to normal death cover, the plan also provides you 4 additional covers.
15 days free lock period from the date on which you receive the policy documents
This is a unique product that offers you an innovative cover (plan B) which helps
you to protect your savings against 'the financial consequences of inflation' with
constant premium for the entire duration of the plan.
It gives you protection against unfortunate terminal or dreaded illness even your
own retirement - in a most flexible manner.
A mutual fund is not an alternative investment option to stocks and bonds, rather it pools
the money of several investors and invests this in stocks, bonds, money market
instruments and other types of securities
Buying a mutual fund is like buying a small slice of a big pizza. The owner of a mutual
fund unit gets a proportional share of the funds gains, losses, income and expenses.
The funds objective is laid out in the fund's prospectus, which is the legal document that
contains information about the fund, its history, its officers and its performance.
Popular objectives of a Mutual Fund:
The company that puts together a mutual fund is called an AMC. An AMC may have
several mutual fund schemes with similar or varied investment objectives.The AMC hires
a professional money manager, who buys and sells securities in line with the fund's stated
objective.
The Securities and Exchange Board of India (SEBI) mutual fund regulations require that
the funds objectives are clearly spelt out in the prospectus.In addition, every mutual fund
has a board of directors that is supposed to represent the shareholders' interests, rather
than the AMCs.
Range of Services
Investment banking
Mutual Funds
Brokerage and distribution of equities
Dematerialization services
Trading in commodities
Life Insurance
Features and Options
Wealth management
Corporate advisory
MEANING
A mutual fund is simply a financial intermediary that allows a group of investors to pool
their money together with a predetermined investment objective. The mutual fund will
have a fund manager who is responsible for investing the pooled money into specific
securities (usually stocks or bonds). When you invest in a mutual fund, you are buying
shares (or portions) of the mutual fund and become a shareholder of the fund.
Mutual funds are one of the best investments ever created because they are very cost
efficient and very easy to invest in (you don't have to figure out which stocks or bonds to
buy). By pooling money together in a mutual fund, investors can purchase stocks or
bonds with much lower trading costs than if they tried to do it on their own. But the
biggest advantage to mutual funds is diversification.
A) Income is earned from dividends declared by mutual fund schemes from time to
time.
B) If the fund sells securities that have increased in price, the fund has a capital gain.
This is reflected in the price of each unit. When investors sell these units at prices
higher than their purchase price, they stand to make a gain.
C) If fund holdings increase in price but are not sold by the fund manager, the fund's
unit price increases. You can then sell your mutual fund units for a profit. This is
tantamount to a valuation gain.
HISTORY
The origin of mutual fund industry in India is with the introduction of the concept
of mutual fund by UTI in the year 1963. Though the growth was slow, but it accelerated
from the year 1987 when non-UTI players entered the industry
In the past decade, Indian mutual fund industry had seen a dramatic improvement,
both qualities wise as well as quantity wise. Before, the monopoly of the market had seen
an ending phase; the Assets Under Management (AUM) was Rs. 67bn. The private sector
entry to the fund family rose the AUM to Rs. 470 bn in March 1993 and till April 2004, it
reached the height of 1,540 bn.
Putting the AUM of the Indian Mutual Funds Industry into comparison, the total
of it is less than the deposits of SBI alone, constitute less than 11% of the total deposits
held by the Indian banking industry.
The main reason of its poor growth is that the mutual fund industry in India is
new in the country. Large sections of Indian investors are yet to be intellectuated with the
concept. Hence, it is the prime responsibility of all mutual fund companies, to market the
product correctly abreast of selling.
The mutual fund industry can be broadly put into four phases according to the
development of the sector. Each phase is briefly described as under:
Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was
set up by the Reserve Bank of India and functioned under the Regulatory and
administrative control of the Reserve Bank of India. In 1978 UTI was de-linked from the
RBI and the Industrial Development Bank of India (IDBI) took over the regulatory and
administrative control in place of RBI. The first scheme launched by UTI was Unit
Scheme 1964. At the end of 1988 UTI had Rs.6,700 crores of assets under management.
Entry of non-UTI mutual funds. SBI Mutual Fund was the first followed by
Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian
Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct
92). LIC in 1989 and GIC in 1990. The end of 1993 marked Rs.47,004 as assets under
management.
With the entry of private sector funds in 1993, a new era started in the Indian
mutual fund industry, giving the Indian investors a wider choice of fund families. Also,
1993 was the year in which the first Mutual Fund Regulations came into being, under
which all mutual funds, except UTI were to be registered and governed. The erstwhile
Kothari Pioneer (now merged with Franklin Templeton) was the first private sector
mutual fund registered in July 1993.
The number of mutual fund houses went on increasing, with many foreign mutual
funds setting up funds in India and also the industry has witnessed several mergers and
acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets
of Rs.1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of assets under
management was way ahead of other mutual funds.
This phase had bitter experience for UTI. It was bifurcated into two separate
entities. One is the Specified Undertaking of the Unit Trust of India with AUM of
Rs.29,835 crores (as on January 2003). The Specified Undertaking of Unit Trust of India,
functioning under an administrator and under the rules framed by Government of India
and does not come under the purview of the Mutual Fund Regulations.
The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC.
It is registered with SEBI and functions under the Mutual Fund Regulations. With the
bifurcation of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of
AUM and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual
Fund Regulations, and with recent mergers taking place among different private sector
funds, the mutual fund industry has entered its current phase of consolidation and growth.
As at the end of September, 2004, there were 29 funds, which manage assets of
Rs.153108 crores under 421 schemes.
TRUSTEE SPONSOR
OPERATIONS AMC
FUND MANGER
MUTUAL FUND
SCHEMES DISTRIBUTOR
The structure consists of
INVESTOR
Sponsor - Sponsor is the person who acting alone or in combination with another body
corporate establishes a mutual fund. Sponsor must contribute at least 40% of the net
worth of the Investment Managed and meet the eligibility criteria prescribed under the
Securities and Exchange Board of India (Mutual Funds) Regulations, 1996.The Sponsor
is not responsible or liable for any loss or shortfall resulting from the operation of the
Schemes beyond the initial contribution made by it towards setting up of the Mutual
Fund.
Trust - The Mutual Fund is constituted as a trust in accordance with the provisions of the
Indian Trusts Act, 1882 by the Sponsor. The trust deed is registered under the Indian
Registration Act, 1908.
Asset Management Company (AMC) - The AMC is appointed by the Trustee as the
Investment Manager of the Mutual Fund. The AMC is required to be approved by the
Securities and Exchange Board of India (SEBI) to act as an asset management company
of the Mutual Fund. At least 50% of the directors of the AMC are independent directors
who are not associated with the Sponsor in any manner. The AMC must have a net worth
of at least 10 crore at all times.
Registrar and Transfer Agent - The AMC if so authorized by the Trust Deed appoints
the Registrar and Transfer Agent to the Mutual Fund. The Registrar processes the
application form, redemption requests and dispatches account statements to the unit
holders. The Registrar and Transfer agent also handles communications with investors
and updates investor records.
Indian financial institution have played a dominant role in asset formation and
intermediation and contributed substantially in macroeconomic development. In this
process of development Indian Mutual Funds have emerged as a strong financial
intermediaries and are playing a very important role in bringing stability to the financial
system and efficiency to resource allocation.
Mutual Fund plays a crucial role in an economy by mobilizing savings and investing
them in the capital market, thus establishing a link between savings and the capital
market. The activities of mutual fund have both short and long term impact on the
savings and capital market, and the national economy. Mutual fund, thus, assist the
process financial intermediation. They mobilize funds in the saving market and act as
complimentary to banking, at the same time they also compete with banks and other
financial institutions. In the process stock market activities are also significant
influenced by mutual funds.
There is thus hardly any segment of the financial market, which is not influenced by
the existence and operations of mutual funds. However, the scope and efficiency of
mutual funds are influenced by overall economic fundamentals: the inter-relation
between the financial and real sector, the nature of development of the savings and capital
markets, market structure, institutional arrangements and overall policy regime.
Debt Funds:
Currently, dividends are tax-free in the hands of the investor. However, there
is distribution tax together with surcharge and education cess, as may be
applicable, payable by the Mutual Fund on dividends distributed. There is no
tax deduction at source on dividends as well. Investments for over 12 months
qualify for long term capital gains. For resident investors there is no TDS on
redemption of the units.
As Mutual Fund provides numerous advantages for investment it has also few
limitations that are listed below:
A) Costs Despite Negative Returns- Investors must pay sales charges, annual fees,
and other expenses regardless of how the fund performs. And, depending on the
timing of their investment, investors may also have to pay taxes on any capital
gains distribution they receive even if the funds went on to perform poorly after
they bought shares.
B) Lack of Control- Investors typically cant ascertain the exact make up of a funds
portfolio at any given time, nor can they directly influence which securities the
fund manager buys and sells or the timing of those trades.
C) Price Uncertainty- With an individual stock, you can obtain real time pricing
information with relative ease by checking financial websites or by calling your
broker. You can also monitor how a stocks price changes from hour to hour or
even seconds to seconds. By contrast, with a Mutual Fund, the price at which you
purchase or redeem shares will typically depend on the funds NAV. In general;
Mutual Funds must calculate their NAV at least once every business day, typically
after the major U.S. exchange close.
GLOBAL SCENARIO
The money market mutual fund segment has a total corpus of $ 1.48 trillion in the
U.S. against a corpus of $ 100 million in India.
Out of the top 10 mutual funds worldwide, eight are bank- sponsored. Only
Fidelity and Capital are non-bank mutual funds in this group.
In the U.S. the total number of schemes is higher than that of the listed companies
while in India we have just 277 schemes
Internationally, mutual funds are allowed to go short. In India fund managers do
not have such leeway.
On- line trading is a great idea to reduce management expenses from the current
2 % of total assets to about 0.75 % of the total assets.
FUTURE SCENARIO
The asset base will continue to grow at an annual rate of about 30 to 35 % over the next
few years as investors shift their assets from banks and other traditional avenues. Some
of the older public and private sector players will either close shop or be taken over.
Out of ten public sector players five will sell out, close down or merge with stronger
players in three to four years. In the private sector this trend has already started with two
mergers and one takeover. Here too some of them will down their shutters in the near
future to come.
But this does not mean there is no room for other players. The market will witness a
flurry of new players entering the arena. There will be a large number of offers from
various asset management companies in the time to come. Some big names like Fidelity,
Principal, Old Mutual etc. are looking at Indian market seriously. One important reason
for it is that most major players already have presence here and hence these big names
would hardly like to get left behind.
The mutual fund industry is awaiting the introduction of derivatives in India as this would
enable it to hedge its risk and this in turn would be reflected in its Net Asset Value
(NAV).
SEBI is working out the norms for enabling the existing mutual fund schemes to trade in
derivatives. Importantly, many market players have called on the Regulator to initiate the
process immediately, so that the mutual funds can implement the changes that are
required to trade in Derivatives.
TYPES OF SCHEMES
A. Investment Objective:
Schemes can be classified by way of their stated investment objective such as Growth
Fund, Balanced Fund, and Income Fund etc.
o MSFU - IT Fund
Debt Funds invest only in debt instruments such as Corporate Bonds, Government
Securities and Money Market instruments either completely avoiding any investments
in the stock markets as in Income funds or gilt Funds or having a small exposure to
equities as in Monthly Income Plans or Children's Plan. Hence they are safer than
equity funds. At the same time the expected returns from debt funds would be lower.
Such investments are advisable for the risk.
B. STRUCTURE
1. Open ended Schemes - The units offered by these schemes are available for sale
and repurchase on any business day at NAV based prices. Hence, the unit capital
of the schemes keeps changing each day. Such schemes thus offer very high
liquidity to investors and are becoming increasingly popular in India. Please note
that an open-ended fund is NOT obliged to keep selling/issuing new units at all
times, and may stop issuing further subscription to new investors. On the other
hand, an open-ended fund rarely denies to its investor the facility to redeem
existing units.
2. Closed ended Schemes - The unit capital of a close-ended product is fixed as it
makes a one-time sale of fixed number of units. These schemes are launched with
an initial public offer (IPO) with a stated maturity period after which the units are
fully redeemed at NAV linked prices. In the interim, investors can buy or sell
units on the stock exchanges where they are listed. Unlike open-ended schemes,
the unit capital in closed-ended schemes usually remains unchanged. After an
initial closed period, the scheme may offer direct repurchase facility to the
investors. Closed-ended schemes are usually more illiquid as compared to open-
ended schemes and hence trade at a discount to the NAV. This discount tends
towards the NAV closer to the maturity date of the scheme.
1. All Mutual Funds expect the statutory ones, will have to seek the approval of the
SEBI and the scheme floated by them shall have to be registered with the SEBI.
2. Mutual Funds shall be established in the form of trust under Indian Trust Act to
be operated by separate asset management companies (AMCs) will be authorized
by SEBI and should have minimum net worth of 5 crores.
3. SEBI will have the power to withdraw authorization to any AMC if it finds the
interest of investors, Mutual Funds or the capital market are not been served.
4. The AMC and the Trustee of a Mutual Fund should be two separate legal entities
and an AMC or its affiliate cannot act as a manager or any other fund.
5. No person should be director of more than one AMC, nor hold the position of the
trustee of director in trust company of funds operated by the same AMC.
6. Mutual Funds must distribute 90% of their profits in any given year.
7. No Mutual Funds under all its schemes shall hold more than 10% of its fund in
the shares or debentures or other instruments of a single company.
8. No Mutual Funds under all its schemes take together shall invest more than 10%
of its fund in the shares or debentures or other instruments of a single company.
9. No Mutual Funds under all its schemes taken together shall invest more than 15%
of its fund in the shares and debentures of any specific industry, expecting those
schemes which have been floated specifically for investment in one or more
specified industries and a declaration has been made in the offer letter.
10. No individual scheme of Mutual Funds shall invest more than 5% of its corpus in
any one companys share.
11. Mutual Funds can invest only in transferable securities either in the money market
or in the capital market.
12. Privately placed debentures, securities debt and other unquoted debt instrument
holding shall not exceed 10% in case of growth fund and 40% in case of income
funds.
13. Mutual Funds will be required to take delivery of scrip purchase and give delivery
in case of income funds.
14. Mutual Funds shall be authorized for business by SEBI and registered companies
with sound track records and good reputation could sponsor this.
15. The entire subscription shall have to be refunded to the investor if (a) The
minimum amount of Rs.20 Crores or 60% of the targeted amount which ever is
higher is not raised for closed-end scheme or (b) The minimum amount of Rs.50
Crores or 60% of the targeted amount, whichever is higher is not raised for an
open-ended scheme.
16. Mutual Funds shall provide continuous liquidity and closed-end scheme shall be
listed on exchange. For open ended schemes, Mutual Funds shall sell or purchase
units at predetermined price based on net asset value, which shall be published at
least ones a week .
ownership of one unit in the fund. It is calculated simply by dividing the net asset value
of the fund by the number of units.
Calculation of NAV
The most important part of the calculation is the valuation of the assets owned by the
fund. Once it is calculated, the NAV is simply the net value of assets divided by the
number of units outstanding. The detailed methodology for the calculation of the asset
value is given below:
Asset value is equal to:
Sum of market value of shares/debentures
Liquid assets/cash held, if any
Dividends/interest accrued
Amount due on unpaid assets
Expenses accrued but not paid
Details on the above items
For liquid shares/debentures, valuation is done on the basis of the last or closing market
price on the principal exchange where the security is traded
For illiquid and unlisted and/or thinly traded shares/debentures, the value has to be
estimated. For shares, this could be the book value per share or an estimated market price
if suitable benchmarks are available. For debentures and bonds, value is estimated on the
basis of yields of comparable liquid securities after adjusting for illiquidity. The value of
fixed interest bearing securities moves in a direction opposite to interest rate changes
Valuation of debentures and bonds is a big problem since most of them are unlisted and
thinly traded. This gives considerable leeway to the AMCs on valuation and some of the
AMCs are believed to take advantage of this and adopt flexible valuation policies
depending on the situation.
Interest is payable on debentures/bonds on a periodic basis say every 6 months. But, with
every passing day, interest is said to be accrued, at the daily interest rate, which is
calculated by dividing the periodic interest payment with the number of days in each
period. Thus, accrued interest on a particular day is equal to the daily interest rate
multiplied by the number of days since the last interest payment date. Usually, dividends
are proposed at the time of the Annual General meeting and become due on the record
date.
dividend. There are other choices where in the investor can choose their dividend payout
frequencies that can monthly, weekly, daily.
Analysis of Questionnaire
RESPONDENTS AGE
age
Cumulative
Frequency Percent Valid Percent Percent
Valid 18-30 32 32.0 32.0 32.0
30-40 26 26.0 26.0 58.0
40-50 21 21.0 21.0 79.0
50&above 21 21.0 21.0 100.0
Total 100 100.0 100.0
age
50&above
21.0%
18-30
32.0%
40-50
21.0%
30-40
26.0%
Interpretation:
Out of 100 respondents 32% are 18 to 30 age, 26% are 30 to 40, 21% are 40 to 50 and
remaining 21% are of above 50. So Mutual funds should more concentrate on young
generation because they have less risk on family and they will investment more because
of career development and retirement benefits.
Cumulative
Frequency Percent Valid Percent Percent
Valid serviceman 19 19.0 19.0 19.0
businessman 39 39.0 39.0 58.0
professional 19 19.0 19.0 77.0
other 23 23.0 23.0 100.0
Total 100 100.0 100.0
serviceman
other
19.0%
23.0%
professional
19.0%
businessman
39.0%
Interpretation:
The responses which I had got 19% were serviceman, 39% were businessman,
19% were professional and the remaining 23% were other people.
MONTHLY INCOME:
what is your monthly income in rupess
Cumulative
Frequency Percent Valid Percent Percent
Valid below 5000 8 8.0 8.0 8.0
5000-10000 18 18.0 18.0 26.0
10000-15000 17 17.0 17.0 43.0
15000-20000 27 27.0 27.0 70.0
20000-25000 15 15.0 15.0 85.0
above 25000 15 15.0 15.0 100.0
Total 100 100.0 100.0
below 5000
above 25000
8.0%
15.0%
5000-10000
18.0%
20000-25000
15.0%
10000-15000
17.0%
15000-20000
27.0%
Interpretation:
Out of 100 samples 8% are of below Rs.5,000, 18% are of above 5,000 and below
Rs.10,000, 17% are of above Rs.10,000 and below Rs.15,000,27% are of above 15,000
and below Rs 20,000, 15% are of above 20,000 and below 25,000 the remaining 15% are
of above Rs.25,000 monthly income.
AWARENESS
Cumulative
Frequency Percent Valid Percent Percent
Valid yes 66 66.0 66.0 66.0
no 34 34.0 34.0 100.0
Total 100 100.0 100.0
34.0%
yes
66.0%
Interpretation:
Out of 100 samples 66% are aware of SBI mutual funds i.e. 66 surveyed people
know about SBI mutual funds and 34% are unaware of the SBI mutual funds. As there is
a lack of awareness in this semi urban city Belgaum, the attempts should be made to
create the general awareness through popular modes of communication that would reach
the potential customers, like Local T.V Channels, Local Newspapers, Theatres, Hoardings
and Banners in the public crowded areas.
MUTUAL FUND:
Cumulative
Frequency Percent Valid Percent Percent
Valid debt fund 35 35.0 35.0 35.0
equity fund 40 40.0 40.0 75.0
no 25 25.0 25.0 100.0
Total 100 100.0 100.0
25.0%
debt fund
35.0%
equity fund
40.0%
Interpretation:
Out of 100 samples 40% respondents have invested their money in equity mutual funds
and the remaining 35%have invested in debt mutual funds and remaining 25% respondents
are not interested.
Cumulative
Frequency Percent Valid Percent Percent
Valid yes 65 65.0 65.0 65.0
no 35 35.0 35.0 100.0
Total 100 100.0 100.0
35.0%
yes
65.0%
Interpretation:
Out of 100 samples 65% respondents have invested their money in mutual funds and
the remaining 35% have not invested in mutual funds. So that the potential market
available for targeting is around 35%.
INVESTMENT COMPANIES:
Cumulative
Frequency Percent Valid Percent Percent
Valid uti 36 36.0 36.0 36.0
sbi 33 33.0 33.0 69.0
reliance money 20 20.0 20.0 89.0
others 11 11.0 11.0 100.0
Total 100 100.0 100.0
others
11.0%
uti
reliance money 36.0%
20.0%
sbi
33.0%
Interpretation:
Out of 100 samples 36% respondents have invested their money in UTI mutual funds,
33% respondents have invested their money in SBI mutual fund, 20% respondents have
invested their money in reliance money and the remaining 11% respondents have
invested their money in other mutual fund.
PLANS:
Cumulative
Frequency Percent Valid Percent Percent
Valid debt fund 35 35.0 35.0 35.0
equity fund 40 40.0 40.0 75.0
if any other specify others 25 25.0 25.0 100.0
Total 100 100.0 100.0
25.0%
debt fund
35.0%
equity fund
40.0%
Interpretation:
Out of 100 samples 40% respondents have invested their money in equity scheme
mutual funds, 35% respondents have invested their money in debt scheme mutual fund
and the remaining 25% respondents have invested their money in other scheme
Cumulative
Frequency Percent Valid Percent Percent
Valid up to 10000 31 31.0 31.0 31.0
10000-25000 41 41.0 41.0 72.0
25000-50000 22 22.0 22.0 94.0
50000-100000 6 6.0 6.0 100.0
Total 100 100.0 100.0
50000-100000
6.0%
up to 10000
25000-50000
31.0%
22.0%
10000-25000
41.0%
Interpretation:
Out of 100 respondents 31% of them have invested up to Rs.10,000, 41% of them have
invested above Rs 10,000 and below Rs 25,000, 22% of them have invested above Rs
25,000 and below Rs 50,000, and remaining 6% of them have invested above Rs.50,000
and below Rs 1,00,000. Mutual fund companies should give advertisement on T.V and
other local medium to attract the customers.
Cumulative
Frequency Percent Valid Percent Percent
Valid discussion with
21 21.0 21.0 21.0
family member
stock holder/agent 45 45.0 45.0 66.0
website 34 34.0 34.0 100.0
Total 100 100.0 100.0
34.0%
21.0%
stock holder/agent
45.0%
Interpretation:
According to respondents the influencing factor to buy mutual funds was 21% of them
were influenced by Family member,45% were influenced by stock holder/agent,34% of
them influenced by website. People who have invested in mutual funds they have
influenced from family member, stock holder/agent, website.
which factor you considered while taking decision to invest in mutual fund
Cumulative
Frequency Percent Valid Percent Percent
Valid returns 36 36.0 36.0 36.0
saving 20 20.0 20.0 56.0
liquidity 16 16.0 16.0 72.0
if any other specify 28 28.0 28.0 100.0
Total 100 100.0 100.0
28.0%
returns
36.0%
liquidity
16.0%
saving
20.0%
Interpretation:
The various attributes the investors look for while buying the mutual funds are 36% of
them gives preference of Rate of Return, 20% of them gives preference of saving, 16% of
them gives preference of liquidity, 28% of them gives preference of other (tax benefit)
People will consider rate of return as a very high attribute while investing in mutual funds
compared to other attributes like saving, liquidity, and other.
Cumulative
Frequency Percent Valid Percent Percent
Valid yes 64 64.0 64.0 64.0
no 36 36.0 36.0 100.0
Total 100 100.0 100.0
36.0%
yes
64.0%
Interpretation:
Out of 100 samples 64% respondents will invested their money in SBI mutual fund,
and remaining 36% respondents will not invested their money in SBI mutual fund.
if no why
Cumulative
Frequency Percent Valid Percent Percent
Valid risk 28 28.0 28.0 28.0
not much knowledge
18 18.0 18.0 46.0
about the mutual fund
bad experience 10 10.0 10.0 56.0
returns is not fixed 23 23.0 23.0 79.0
all of the above 21 21.0 21.0 100.0
Total 100 100.0 100.0
if no why
21.0% risk
28.0%
18.0%
bad experience
10.0%
Interpretation:
The reason for not opting for mutual funds for those 28% respondents they feel mutual
fund involves high risk, 18% respondents not much knowledge about mutual fund, 10%
respondents had bad experience with mutual funds because they have lost their money in
past, 23% respondents they feel mutual fund return is not fixed, 21% respondents all of
the above reason.
FINDINGS
Thus on the basis of the study conducted we can see that Mutual Fund is one of the best
options for investment as it has many advantages of diversification, professional
management, economies of scale, liquidity etc. From the survey conducted it was found
that
Investors invest in Mutual Funds as a high return and (saving) security in their old
age or as retirement security. While others invest to gain access to stock market
through professional management and for higher education.
Around 30% of the investors know about the tax benefits of investing in Mutual
Funds.
SUGGESTIONS
Investors are not very much aware of the investment opportunities, therefore they
have to be educated about this form of investment. In order to educate the
Government as well as the Non-government employees, seminars and workshops
could be conducted in these organizations and try to clear their doubts and
misconceptions about Mutual funds.
CONCLUSION
From the above study it is seen that there is an attractive market for mutual funds in
Belgaum provided awareness should be created of the different schemes and people
should be educated with all the information of mutual funds.
References
Company website
Magazines
www.moneycontrol.com
www.mutualfundsindia.com
www.amfi.com
Annexure
QUESTIONARRIE
1. Age
a] 18-30 ` b] 30-40 c] 40-50
d] 50 & above
Up to 10,000 10,000-25,000
25,000-50,000 50,000-1, 00,000
11. Which factor you considered while taking decision to invest Mutual
Fund?
Returns Saving
Liquidity If any other specify.
13. If no why?
1. Risk
2. Not much knowledge about the Mutual fund
3. Bad experience
4. Returns is not fixed
5. All of the above