NEW DELHI: Emphasizing that higher threshold levels for mutual funds is in the interest of investors, SEBI chief U K Sinha has said minimum 50-crore net worth for mutual funds is necessary to keep away non—serious players and to ensure stability of the financial system.

The Securities and Exchange Board of India (SEBI) Chairman also cautioned that collapse of even a small player could be as fatal as that of a larger peer for entire system.

Earlier this year, the capital markets regulator hiked the minimum net worth requirement for mutual funds to 50 crore from 10 crore. The move elicited concerns from some quarters who feared that it would adversely impact the small players present in 10-lakh crore mutual fund space.

While rejecting such apprehensions as unfounded, Sinha defended the hike in threshold limit saying, “I personally feel that the requirement should be more than 50 crore.”

“There is a theoretical argument that mutual fund is a pass-through (because they collect funds from investors and invest into stocks, bonds and other securities). So, why do you need such a requirement? That is their argument.

“But if you look at it, that 10 crore requirement was placed in regulations in 1990s... With sheer inflation, how much 10 crore would have become now? That is one argument from my side,” the SEBI chief told PTI in an interview.

Citing instances from the past, Sinha said that once a mutual fund company was in such a deep financial trouble that SEBI and RBI were forced to find a buyer for it overnight. To avoid recurrence of such an incident, Sinha said, there can not be any compromise on minimum threshold limits.

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