By IANS,
New Delhi : The finance ministry soon proposes to make cheque payments and disclosure of personal account numbers (PAN) mandatory for the purchase of all financial products, but many warn this will go against the objective of expanding the reach of mutual funds.
“Payment by cheques and disclosure of PAN number for financial transactions is in line with what the finance minister said in this year’s budget,” said C.S. Mohapatra, the director for capital markets in the finance ministry.
“We propose to implement this soon,” he told a seminar on the distribution of financial instruments here. However, experts said this would go against the larger objective of widening the reach of safe investment instruments.
“Cheques and PAN numbers are biggest hurdles to expanding the reach of mutual funds in rural areas,” said A.P. Kurien, chairman of the Association of Mutual Funds in India (AMFI).
“The policy is contradictory. This requirement will be inimical to ensuring financial inclusion of people in rural areas. Insurance products do not have these requirements. That’s why such products have a good market in the hinterland,” Kurien told IANS.
“The fear of permanent account numbers has virtually disappeared,” Finance Minister P. Chidambaram said in his budget speech Feb 29. “I propose to extend the requirement of PAN to all transactions in the financial market, subject, however, to suitable threshold exemption limits.”
Kurien said most rural people did not know what PAN was. “Some think it is ‘paan’ – you know, the popular betel leaf you munch on.”
“This is certainly a contradictory stance as you cannot have more financial inclusion if people in rural areas have to to get PAN cards,” S.K. Dhingra, managing director of the New Delhi-based SMP Investment Advisers, told IANS.
Young independent financial adviser Bharat Bhushan, who heads the Delhi-based financial products distributors Money Options Services, however, felt it may not be such a problem if PAN was made mandatory.
“Even rural people get ration cards. So they will get PAN cards too. Distributors themselves could offer to get the PAN cards made as part of the services they offer,” he said.”
Rajesh Jain, who runs a portfolio investment firm in Rohtak town of Haryana, also said the PAN requirement is certainly a big barrier, adding that he knew the rural market well and he was speaking with some experience.
Mohapatra himself quoted a McKinsey report and said some 85 percent of Indians had never heard of demat accounts, which invited a query from experts like Jain: “Have they heard of PAN cards either?”