These 20 funds out of 32 mutual funds have also attained 51 per cent dematerialisation of their holdings till July 1998. ``The amount of savings would have increased beyond October as NSDL has further slashed the charges,'' said the chairman Association of Mutual funds in India (Amfi), AP Kurian.

``Transaction costs as well as costs involved in keeping physical shares in custody is high. Whenever, trading is done in demat form, the cost of both transaction as well as custodial charges comes down substantially. There is also reduction in the cost of monitoring and bad deliveries,'' said Kurian.

For example, if the cost of transaction in physical form is Rs 1.25 lakh, this cost is considerably reduced to Rs 17,000 in the demat form, a neat saving of Rs 1.08 lakh with the cost of carrying shares in electronic form also reducingsizably, said Kurian.

Among the 20 funds that have benefited are ITC Threadneedle, JM Mutual Fund and Tata Mutual Fund. Speaking to The Financial Express, the managing director of Tata AMC, KN Atmaramani said: ``In the Tata Equity Growth Fund, the AMC would pay around Rs 45-50 lakh this year in custodial charges as compared to last year of Rs 70 lakh, thus saving Rs 20-25 lakh. This amounts to a reduction in cost by 30-35 per cent.''

``In the coming months, the industry tends to gain further by savings to the extent of Rs 6-8 crore, as NSDL has sliced charges since October and the dematerialisation level increases,'' said Kurian. The savings in costs would eventually trickle down to the investor as it gets reflected in the NAV.

``Apart form saving on costs, it saves a lot on our back office task. Churning of portfolio becomes less tedious and we get clean shares,'' said the vice-president of a private sector mutual fund.

``We still have hundreds of our shares lying with our registrars, pendingclearance since there is a major back-log which is a big irritant. Being large buyers of shares, we get cheated in share delivery in the physical form which adds to our cost and dents our performance,'' he added.