Finance ministry may ask Sebi to bring back entry load for brokers

NEW DELHI: In order to promote the sagging mutual fund industry, finance ministry may advise the Sebi to consider re-introduction of entry load for brokers.

"We will meet representatives of mutual fund industry and Sebi officials and will advise them to consider measures including re-introduction of entry load to revive the fortunes of mutual fund industry," a senior finance ministry official said. The ministry officials will meet mutual fund industry representatives and Sebi officials on Monday.

The entry load- 2.25% commission paid to distributors- was banned in 2009 by former Sebi chief CB Bhave, who felt investors were being taken for a ride by distributors who encouraged investors to churn their portfolios. The ban, however, led to drying up of inflows into funds.

The meeting comes close on the heels of Prime Minister Manmohan Singh's statement on Wednesday that there were problems facing the mutual fund industry that needed to be resolved.

Lesser investment in mutual fund products and other saving instruments have prompted higher money flow to gold, which has pushed up the current account deficit of the country due to rising imports of the commodity.

To restrict the investment flow to gold, which is considered as a dead investment, the government is now planning to make mutual fund schemes attractive for retail investors.