SEBI to Overhaul Mutual Fund Regulations for Greater Investor Focus and Industry Ease

The Securities and Exchange Board of India (SEBI) is undertaking a comprehensive review of the mutual fund regulatory framework to make it more investor-centric and business-friendly.

Speaking at the 17th Mutual Fund Summit hosted by the Indian Chamber of Commerce (ICC), SEBI Executive Director Manoj Kumar said, “We are reviewing the entire mutual fund regulatory framework to enhance ease of doing business for all stakeholders, including the regulator.”

Stakeholders have expressed that existing regulations are complex and lengthy, often not aligned with the rapid evolution of investor needs and industry innovation. SEBI's initiative aims to modernise the framework to reflect these changing dynamics.

Mutual Funds as Pillars of Financial Inclusion

Kumar emphasised that mutual funds are central to SEBI’s strategic roadmap to foster inclusive financial growth and strengthen investor protection. “Mutual funds form a critical pillar of India’s capital markets and will drive the third major transformation after electronic trading in 1998 and full dematerialisation of shares,” he said. He highlighted that India remains the only country to achieve 100% dematerialisation—a feat that underlines SEBI’s leadership in market infrastructure.

SEBI’s “optimum regulation” approach aims to balance the interests of all stakeholders—regulators, the industry, and investors—while encouraging transparency, governance, and growth.

Expanding the Investor Base and Product Suite

Despite the industry surpassing ₹72 lakh crore in AUM and monthly SIP inflows crossing ₹28,000 crore, India has just 5 crore mutual fund investors in a population of 140 crore. Kumar stressed the need for deeper penetration across demographics and geographies. To expand investor choice, SEBI has approved a new category—Specified Investment Funds (SIFs)—targeting individuals with investment sizes between ₹10 lakh and ₹50 lakh. These products will be managed by mutual funds due to their strong governance track record.

SEBI is also simplifying scheme categorisation norms to make fund options more intuitive and aligned with investor expectations. Meanwhile, faster registration windows have been opened for Portfolio Management Services (PMS) and Alternative Investment Funds (AIFs) offering similar mid-size ticket investment options.

Also Read: SEBI Eases IPO Norms to Boost Startup Listings and Founder Incentives

Strengthening Disclosure and Regulatory Balance

Addressing industry concerns over stress test disclosures for mid- and small-cap funds, Kumar reaffirmed SEBI’s disclosure-based regulatory model. He emphasised that transparency builds trust and resilience in the market. “Informed investors are the backbone of a strong market,” he said. While acknowledging that some compliance burdens may feel excessive, Kumar assured that SEBI remains open to streamlining processes and invites stakeholder feedback.

“Our role is not to disrupt but to allow the business to thrive responsibly,” he added, urging the industry to pre-empt issues and reduce the need for reactive regulation.

Focus on Eastern India and Financial Literacy

Highlighting the untapped growth potential in Eastern India, Kumar identified West Bengal and the Northeast as key regions for targeted mutual fund expansion. SEBI is encouraging deeper engagement and investor education in these underpenetrated markets.

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