June 13, 2024
New Delhi
Finance Mutual Funds

Who Regulates Mutual Funds in India?

Regulates Mutual Funds in India

Who Regulates Mutual Funds in India? Mutual funds are a type of investment product where several investors combine their money into a single pot of AMC businesses under various plans and categories. A seasoned fund management team oversees the management of these funds. In India, there are many different kinds of mutual funds that combine many forms of investment vehicles, including equity, debt, fixed income, etc.

Read: How to Add Nominee to Mutual Funds

‘Mutual Funds’ is a term for a type of investment. This investment is very popular among the salaried class, but because of a lack of knowledge and a shortage of time, the investors’ funds are managed by asset management companies (AMCs). AMCs are known to be in charge of mutual funds. This is the best investment choice for people who want to invest in the stock or bond markets but don’t have the knowledge or time to perform their research.

Who Regulates Mutual Funds in India?

The primary regulatory body, which is called the Securities and Exchange Board of India (SEBI), is the head of all mutual funds and mutual fund companies. SEBI is fully responsible for policing all aspects of mutual funds, including the creation of mutual funds, how they are managed, their operations, the fees charged by AMCs, the performance of these fund managers, etc.

The Rules 1996 are the regulations that specify how mutual funds are regulated in India, according to the Securities and Exchange Board of India (Mutual Funds). To keep up with the constantly changing market conditions and investor requirements, these guidelines are periodically reviewed and modified.

Mutual Fund Regulation by SEBI

SEBI is the pillar of India’s mutual fund business. It is responsible for the development of policies to regulate mutual funds. On April 12, 1992, the Indian government established the Securities and Exchange Board of India (SEBI) to oversee the country’s financial and securities markets. 

In order to protect investors’ interests in the securities industry, SEBI works on all regulatory frameworks. Additionally, it seeks to promote, examine, and regulate regulations that could reveal gaps in the security sector. SEBI is hence in charge of authorizing initial public offerings, new AMC approvals, new mutual fund registrations, and many other things.

To enlighten investors about how mutual funds operate, SEBI has established a set of guidelines. It has not only streamlined these guidelines but also kept an eye on the process of consolidating and combining mutual fund schemes. The policies cover the whole regulatory landscape, including the laws and regulations governing mutual funds’ development, management, and operation. 

The major objective of the functioning of SEBI is to safeguard the interests of investors who invest their hard-earned money in mutual funds and ensure that investors are informed about the transparency of mutual fund operations so that they may make good decisions in their favor

and are not misled by anyone.

Here is a rundown of some of the most significant guidelines and recommendations that SEBI has published for Indian mutual funds:

The SEBI (Mutual Funds) Rules of 1996

In India, these rules and regulations of SEBI control mutual funds completely. SEBI also observes the procedure for creating mutual funds, their maintenance, and the way they are managed. The regulations address matters like the registration of mutual funds, the designation of trustees, the role of fund management, investment caps, and transparency standards.

Mutual Fund Rules Under SEBI, 2020

These laws were implemented in order to address issues with risk management and asset allocation as well as worries about the concentration of mutual fund portfolios. The concentration of funds in one place can be risky, so there are certain rules to minimize this risk and encourage the investors’ funds to be invested in a variety of stocks and different sectors. The laws governing mutual funds mandate that they diversify their funds across stock and sector holdings across all of their portfolios.

Mutual Fund Schemes: Classification and Justification

To explain the mutual fund industry, the Securities and Exchange Board of India (SEBI) has released this circular. For attaining the justification for mutual Mutual investment, very few mutual fund schemes are offered so that everything can be made clear. There are distinct classification guidelines that are established for mutual fund schemes. Investors’ knowledge and comparison of the various mutual fund schemes are intended to be made simpler.

RBI Regulation of Mutual Funds

While SEBI is still the central supervisor for mutual funds, other industries have their own separate independent regulators. The RBI is in charge of the country’s money market and foreign exchange market, which are totally governed by the RBI. Therefore, in order to invest in the money market, invest abroad, accept investments from non-resident Indians, send foreign currency both in and out of the nation, and do other activities, mutual funds must abide by RBI laws.

Mutual Fund Self-Regulatory Organisations (SROs)

It’s important to comprehend the SRO’s position in MF regulations. SROs are the sole authority for specific legislation regarding mutual funds. Exchanges like the NSE, BSE, and MSEI, as well as major depositories like NSDL and CDSL, are given self-regulatory obligations in the context of mutual funds. In India, mutual funds are in the process of hiring an SRO to supervise their distributors. An SRO is not an AMFI. Only the broader aspect of the policy framework was established by SEBI.

Regulation of AMFI as an association

A trade association, the Association of Mutual Funds in India (AMFI), was established to promote the interests of the mutual fund industry. This association includes AMCs as members. Similar organizations include CII, ASSOCHAM, NASSCOM, FICCI, etc.

SEBI Mutual Fund Regulations

Prospective investors’ interests are safeguarded by SEBI regulations for mutual funds. The job of SEBI is to oversee industry regulation and establish rules to safeguard investors’ interests. The new guidelines are there to put a big emphasis on uniformity. The guidelines focus on the plans that mutual fund companies have for the operations of their funds. Precautions to be taken before investment in mutual funds by the AMCsBefore proceeding in the line of mutual fund investment, you should try to take a few things into consideration:

1- Examining One’s Finances

In comparison to other investment options, mutual funds provide a superior investment opportunity. For a proportionally larger risk, it may have the potential to provide a higher return. Every plan is distinct. Due to their exposure to the financial market and its turbulence, mutual funds are volatile and prone to risk. Investors who are very hopeful about their investment need to understand the risks involved with each plan. If such schemes underperform, investors must carefully evaluate their investment goals and risk tolerance.

2- Information On Schemes Based on Research

Understanding the pertinent details of any mutual fund strategy is essential before investing. It is important for investors to be sure to make a decision based on the guidance of fund managers. If they do a thorough study and take all relevant information into account, they can make good decisions.

3- Portfolio Diversification

Making diversification within the mutual fund portfolio a very important aspect of investment for the purpose of lowering the inherent risk of volatility There are very heavy risks and potentially enormous losses that can only be avoided through diversification.

4- Keep Your Portfolio Organised.

It is crucial to match the investment objective and risk while choosing each scheme to create a mutual fund portfolio. Following an investment, the investor must carefully manage each unique programme and track its progress.

5- Setting The Investment Duration

The investors should provide each programme with a specific investment length in order to promote financial progress. For instance, an equity mutual fund needs a long time frame to reach its investment goal. Therefore, the time period assigned by the investor must be equal to or larger than the investment term proposed by the strategy.


In India, the rules and regulations governing mutual funds are established by SEBI. It is a responsible authority in the mutual fund sector. SEBI’s priority is to safeguard the interests of investors. It establishes all the rules and regulations while keeping in mind the welfare of investors. 

The recommendations made by SEBI help investors make more sound and stable investment choices. It is authorised to regulate and promote securities in the Indian market. It is liable to offer every specific detail that is necessary for the operation of each mutual fund plan. 

The SEBI rules are not only there to safeguard the interests of investors, but they also put a strong emphasis on streamlining the process of various mutual fund programmes provided by fund managers. The strategy of SEBI is such that it helps investors make investments in various mutual fund schemes and follow the SEBI criteria for mutual funds.

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