• SEBI will soon introduce a new light-touch regulatory framework for passively managed mutual funds like exchange traded funds (ETFs) and index funds, which have seen a sharp uptick in assets under management (AUM) in recent years, a member said.
  • “We are going to introduce new mutual fund regulations which we are calling ‘Mutual Fund Lite’ regulations for passives [funds],” Securities and Exchange Board of India (SEBI) whole-time member Ananta Barua said on Friday, pointing to the surge in the share of ETFs and index funds in industrywide AUM, from 6% in 2019.
  • As of March 23, 16.5% of the ₹41.6 lakh crore mutual fund assets were in passively run funds that blindly mimic the composition of stocks in different share market indices like the NSE Nifty 50 and BSE Sensex.

Index funds

  • While ETF units can be traded even intra-day on the bourses, index funds offer traditional MF units, which can be bought or redeemed at their net asset value that is revised daily.
  • “We have decided to encourage them because these funds provide transparency, diversification and [at a] lower cost vis-à-vis active funds,” Mr. Barua observed at an Assocham MF summit.
  • “Their investments are not discretionary, but tied to the nature of the changes in the underlying index.
  • “The new type of regulations… will reduce compliance requirements, which are required for actively managed funds in different aspects, but can be dispensed with for passive funds.


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