FM says it will be made more attractive for investors
Finance Minister P. Chidambaram today formally launched the Rajiv Gandhi Equity Savings Scheme (RGESS) in Mumbai, with a promise to make it more attractive for small investors in the days to come. The Scheme which is aimed at attracting first time investors in Stock market was announced in the budget 2012-13.
Speaking at the launch function attended by top bankers and investment managers, Mr. P Chidambaram termed RGESS was an instrument that would encourage individuals with moderate income to consider equity investment. “Indians save, save even during adverse conditions” he said. He however, regretted that even though the savings accounted for as high as 30-36 percent of GDP, most households preferred to invest in physical assets like gold and real estate. “Even after 22 years of liberalization, despite having a flourishing capital market and a strong regulatory framework, the savings are not channelized into the financial sector” observed FM. He noted that equity was viewed as speculative by most people, but said “investment in equity is good for the investor; good for the financial system.”
Mr. Chidambaram admitted that initially, the RGESS was considered to be a complex instrument and the tax incentive on investment upto Rs 50,000 was not adequate. “We have tried to be creative to make it more attractive; we have allowed mutual funds to participate in RGESS and we have broadened the definition of first time investor to include Demat account holders who have not transacted previously”,he said. FM said there were still certain issues left, which he promised would be addressed during the coming budget.
Mr. Chidambaram also called for simplification of procedures and specifically integration of KYC (Know Your Customer) norms. “There are simply too many regulations. KYC under single regulator must converge in the first phase and thereafter there should be convergence of KYC under different regulators in the market”. He added “If you ask too many questions, you will frighten the investor away; what is the use of so many regulators if investor stays away?”
On the occasion, Mr. Chidambaram also unveiled the logo of RGESS and released a FAQ booklet on the scheme, aimed at creating investor awareness.
There are already 11 Mutual Fund schemes confirming to RGESS. Five new Mutual Fund RGESS schemes - by SBI Mutual, LIC Noumura, IDBI, UTI and DSP Blackrock - were launched today. Under RGESS an individual with annual income less than Rs 10 lakhs would get tax incentives investment upto Rs. 50,000.
SEBI Chairman, S K Sinha, Secretary, Economic Affairs, Arvind Mayaram, CEOs of National Stock Exchange and Bombay Stock Exchange, Senior bankers and investment Managers were present for the RGESS launch in Mumbai.
PIB Mum/MD/BG/Kn
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