India’s markets regulator, SEBI, has released a new circular revisiting the categorization and rationalization of mutual fund schemes. The move aims to enhance clarity, reduce portfolio overlaps, and balance investor protection with product innovation. Asset managers and trustees are expected to align schemes with the revised framework for better comparability.
The Securities and Exchange Board of India (SEBI) has issued a fresh circular on mutual fund scheme categorization and rationalization, building upon earlier frameworks introduced in 2017 and 2020. The regulator observed significant portfolio overlaps across schemes, prompting the need for clearer definitions and stricter limits.
The circular seeks to ensure uniformity, transparency, and investor understanding, while also allowing flexibility for innovation in products such as REITs and InvITs. Mutual funds and asset management companies (AMCs) must now comply with revised guidelines to improve comparability and reduce duplication across offerings.
Key Highlights
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Objective: Enhance clarity, comparability, and investor confidence.
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Issue Addressed: Significant portfolio overlaps among schemes.
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Framework: Builds on SEBI’s 2017 and 2020 circulars.
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Flexibility: Allows innovation in new products like REITs and InvITs.
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Compliance: AMCs and trustees required to align schemes with revised categorization.
This initiative reflects SEBI’s ongoing efforts to strengthen India’s mutual fund industry, balancing investor protection with market innovation.
Sources: Finsec Law Advisors, TaxGuru, The Economic Times