Problems of Mutual Funds in India

Abstract

India is one of the fastest growing economies in the world due to which the income level of people in India is increasing and along with it the savings and investments are also growing. Due to liberalization and deregulation which was announced in Ne Industrial Policy, 1991 has dismantled barriers in the financial market, allowed the entry of newplayers and created environment for efficient allocation of resources. One of the important industries in emerging financial market is the mutual fund industry. The mutual fund industry has played a significant role in the development of capital market, growth of corporate sectors and financial intermediation. Despite all the advantages linked with mutual funds, people still prefer to invest their money independently. So far mutual funds have not been able to introduce the schemes which is suitable to the needs of farmers, small entrepreneurs and merchants to tap the rural savings. Further mutual funds have not yet developed product structuring to tap target customers. There is a lack of product conceptualization and innovation. Weak distribution and marketing channels are another problem which the mutual fund industry are facing today. The merchant banking industry is not sufficiently matured and this has led to slow development of mutual fund industry. The interesting thing is that mutual funds are the most misunderstood financial products in India. Mutual fund industries are also not making efforts in investor awareness programmes which are the need of the day. With an objective to make the investors aware of the problems of mutual funds, an attempt has been made to provide an information on the problems of mutual funds in India.