Moneycontrol MF Summit 2025: Full text of SEBI member Amarjeet Singh's address on mutual funds' success story and need for self regulation in industry

Amarjeet Singh, Whole Time Member, Securities and Exchange Board of India (SEBI)

Amarjeet Singh, Whole Time Member, Securities and Exchange Board of India (SEBI), speaking at the Moneycontrol Mutual Fund Summit 2025 on Monday, June 23, talked about growth of mutual funds, investment opportunities and the need for self regulation in the industry.

Here's is the full text of his address:

Good evening. It's indeed a pleasure to be here. In fact, I thought Mahalakshmi would allow couple of questions to the panel and I would ask a question. But that opportunity was not there. So, yes, yes, I know, I know.

So the question that I wanted to ask was, I'm digressing from what I have to speak. So, see, as a regulator in India, you can see my brain in two parts. One part relates to development of the market, and one is very happy to see the growth. And one part is that of a regulator, which worries, and we are paid to worry. You know, I mean, we are paid to, spoil the party, if I can say, or at least caution the people that look -- we are trained to think more in terms of risks.

So the question I had in mind was that while we are growing at a fantastic speed, and it's a phenomenal growth. It's a huge success story. And there was a discussion around, there's a need to expand more. There's a huge potential to get more money into the mutual fund category. What worries me is that, not a worry. I mean, what we need to be watchful about is do you have enough investment opportunities? Do you have enough asset classes to invest in? Is too much money chasing too few good opportunities?

So there are no easy answers to it. Thankfully, we seem to have a good primary market, good pipeline of IPOs coming in and so on. But I guess the speed at which money is coming in, we'll also have to work. And in that sense, mutual funds also have a stake in ensuring that there are more investment opportunities in the market where money can be invested in very productive manner.

Growth and Regulation

Anyway, I think let me come to my presentation. So, in fact, when Mahalakshmi reached out to me that I should come for this event this year also. So I was a little reluctant. I said, look, I don't have much to tell you all. You guys know everything, and what value can I add?

But then, we were discussing, and we said, okay. As a regulator, while we celebrate the growth story, which I could maybe talk about growing the right way. And what is that right way in terms of growing? Basically just putting a word of caution here and there. And also, I've been personally, and Navneet talked about it, fascinated about the discussion on culture and ethics.

So -- and I feel that part is often under discussed in our ecosystem. While we definitely talk about the growth story, success story and so on. But what is the role, a good culture and ethical framework in the industry. How, if we strengthen that, we would probably be going the right way. That's in nutshell what I wanted to talk about today. So let me just move on.

So what I would cover is the growth story which you all are familiar with. By the way, on the growth story, again, when I joined SEBI, that was 30 years, more than 30 years ago. So that time, this everything was very new for all of us, all of us in the system. And one vision that we had even at that point of time was how do we create equity culture in the country?

And we had some examples of very developed markets. And one, actually, two, I would say. Two routes that we very consciously chose at that point of time was, we'll encourage individual investors to come to the market through mutual funds. And we'll also encourage individual investors to participate in the IPO market so that they get a sense of how the markets work, what are the prospectus, how do you invest and so on.

Reaching a Trillion

You know that caption of your summit today that reaching $1 trillion dream. It was actually a dream. It was a very distant dream for us at that point of time. And by that point of time, even years later, we had not thought of such numbers. So it's very gratifying for me professionally and personally to see that vision is getting fructified in terms of when I see the reach, the depth our market has achieved in the recent years, the way mutual fund industry has grown is very gratifying, and I'm happy it is happening before I superannuate from SEBI.

So in some sense, it's good to see how -- and also, let me also mention that we are one of the unique markets where regulators have very closely worked, especially in this segment. We worked very closely with AMFI to chart out the growth path of the industry. So as I said, growth story is known, but I'll show you some slides on that.

Growing the right and responsible way, there are many, many dimensions to it, but in the interest of time, I'll talk only about what is the context in which growing the right and responsible way becomes very important. And that context is increasing democratization of the market, and I'll talk a little bit about that.

Then the one important theme was how we can focus on strengthening ethical behavior in the industry by focusing on culture and ethics issues. And also want to touch upon the way we work with AMFI and how we can make it even better in terms of outcome based collaborative regulation and some takeaways in the end.

Mutual fund growth

So the growth story. INR 72 lakh crore AUM in May 2025, which used to be INR 8.25 lakh crore in 2014. I mean, figures speak for themselves. I don't have to say much. Nine-fold increase in a period of 11 years, which is fantastic.

So this is a snapshot of the journey so far. Roughly about 10 years ago, 2015, '16, '14, that period, you had 810 schemes. Of course, as you rightly pointed out, there's too much to handle for investors perhaps, and we are looking at that. INR 3,000 crore SIP inflows, which are today almost $3.026,688 billion. So that was what I was referring to. So much money coming in and all sorts of negative news very easily or very quickly gets factored in and there's no stoppage there, which is good. I'm not saying it should not happen. It's good. We need more and more people to come and participate in the market. But we need to also look at expanding the investment opportunities.

Share of B-30 to total AUM from 9% to 18%. Share of retail to total AUM, again, 23% to 28%. Number of distributors has gone up from INR 70,000 to INR 2 lakhs. And number of four years also today is INR 23 crores, which used to be INR 4 crores. What are the key drivers? Key drivers are use of technology, on-boarding, transacting and customer service, buoyant markets, of course, regulatory reforms, and I'll talk about that, and a strong focus on investor education.

Another important data point here, this is flow of financial assets of Indian households. So in terms of the flow in 2013, the deposits, the bank deposits, NBFCs and other deposits, out of INR 100, INR 57 would go to deposits, which has now come down to INR 37.2. Mind you, it is the flow. It is not the distribution. And look at the mutual funds, 0.8%, and now it is 6.1%. Again, there's a tremendous potential. There's a lot of runway for this number to grow.

Responsible growth context

Now let's talk about the next segment of my presentation, growing the right and responsible way. What is the context? So growing the right and responsible way becomes very important when we as a regulator are focusing on increasing democratization of the market. More and more people are coming in. They are trusting mutual funds with their money, and that trust is very important, and that should not get disturbed.

And I wanted to take you through how and this is, again, unique to us, how as a regulator, as a part of our developmental function, how we are very consciously work towards the growth of this segment of the securities market. So we started with reservation of shares for mutual funds in IPOs, which has continued till today. We created certain percentage for them in as a part of anchor investor category. And also in public, we created certain reservations on mutual funds.

We introduced B-15 incentives in 2012, B-13 2018. Micro SIP is the latest tradition, and I guess we need to do more here. This INR 250 SIP. And I don't like to call it choti SIP. I hear that term often, but I believe we should not calling it choti, we should not belittle it. It's very important segment of our target savers. So Micro SIP 885 registrations, I believe we can do much more here, and I hope we'll see more traction.

Investor education, by AMCs setting aside of 2 bps, education by AMFI, SEBI, cap on total expense ratio, a very closely regulated market to protect the interest of investors in mutual funds. All this has actually led to increasing democratization of the market. What are the key underpinnings of responsible growth? It's very simple, and we hear these terms very often. Trust, transparency, and accountability. If we have these three things in place, this will lead to responsible growth, which will further lead to more democratization of the market.

Democratization story

I had a very interesting meeting with some distributors recently, and one of the distributors told me her story as to how she got, and I'm sure you have many more stories to tell, but this is just one example. So she told me, and I was quite impressed. I said, why don't you share this? This could be a case study sort of thing. Why don't you share the story with me? So she sent me a two pager on this.

So she came across this very low skilled worker who used to go to people's houses, house to house, and he was basically a massage person. He'll go and do massage of the people. And this distributor was actually visiting the client where this massage fellow was there. And he saw her advising the client, and then he reached out to her separately outside the house. Can you help me also?

And she said, yes, sir. Why don't you start a SIP? And he started a SIP. He was a resident of slum area. He started three SIPs of INR 1,000 in 2007, which I'm sure he increased, added more to it. He also invested small lump sum savings every three to six months. In a nutshell, what he invested since 2007 was INR 53.4 lakhs, not a small amount, but I'm sure it grew over time. Current value is INR 2 crores. Unrealized gains, INR 1.56 crores. Overall IRR is 14.63%.

Number of folios realized there. So this is a testimony. And I'm sure there are many more success stories like this. This is the real democratization. And today, this person is supporting education of girl children in his native village. So I think it's -- and when I was telling the distributor, you should go out and share this, she told it much better than I am telling you.

She told her there's such passion that I was really impressed. So success factors are responsible guidance, professional, and see, he interested her. He didn't know anything about the market. He simply interested her with his money. So responsible guidance, professional fund management, disciplined investing, and power, everything has come together to make the success story.

Ethics & self-regulation

Now let's talk about what do you mean by growing the right and responsible way. As a regulator, we can only go up to a point when the - we can create frameworks. We can create do's and don'ts. We can create penal provisions and so on. But when it comes to some misconduct which happens on the ground, we are not there. And in that sense, our job becomes post factor reactive, and you can't help it.

So we can go up to a point. What we need is while we grow, while we celebrate, we should also focus on effective self regulation. And that's what we are trying to do with AMFI. That's where culture and ethics becomes important. Effective gate keeping, role of auditors, internal and statutory, role of AMC boards, role of board committees, role of trustees. All this is very important. And outcome based collaborative. I'll talk, today, want to focus more on culture and ethics and maybe a little bit about outcome based collaborative, what I mean by that.

So the ethical behavior, how do we strengthen that? There are very good players in the market. I'm not at all trying to suggest that it's a huge issue. It's a huge market failure issue. No, it is not. I'm just trying to suggest that while we grow, let's also continue to strengthen our systems so that there are no accidents. There's no loss of trust of investors who are reposing faith in the industry. So culture is a very abstract, amorphous terms. It means different things to different people, but we need to break it down.

What exactly does it mean, especially in the context of the mutual fund industry? Generally, it is referred to the way of doing things, driving. It drives conduct. It shapes decisions and actions at every level. And also sometimes it gets confused that you have a good value statement running into number of pages and people sign on it, some codes of conduct. But that does not necessarily ensure that that is the culture of the organization. Culture of the organization is what is the core of it? What employees view as acceptable behavior?

You may have reams of paper, but there could be a huge disconnect between what is practiced and what is preached. So in that sense, it's very important to identify that point. But if you ask me personally, if I can describe just in one line, it is doing the right thing in the right manner. So, if you're just conscious of that, I'm doing the right thing, and I'm doing it in the right manner. So both ends and means are sort of taken care.

And very often, we've seen so many scams and crisis world over, even the global financial crisis. If you ask me, if you drill down deeper into the reasons for global financial crisis, you will probably identify that it was a huge ethical failure on part of the people who were selling those products which were designed to harm the investors, which were missold to investors and caused huge losses to investors. But very often, as it happens, we shoot the messenger, but we don't address the root cause.

There was very little discussion on the ethical failures or on the ethical dimensions of the crisis. Lot of other reforms happened. So root cause often is ethical issues, ethical culture, which is not much talked about. And key to ensuring that investor interests are prioritized over short-term gains could be just one guidepost at the part of the culture, the AMCs and the distributors and the rest of the stakeholders would like to emphasize.

Ethical culture challenges

Challenges to ethical culture. Why does ethical lapses happen? See, there are competitive pressures in AMC. There could be five fund managers. Each fund manager may be competing with each other to show better performance. There's a competition internal apart from the external competition. Growth pressure, everybody wants to be in the top 10 AMCs. I want to grow my AUM, come what may. Do whatever is, if others are doing something wrong, you can also do it, but grow your So I mean, I'm just generalizing. Pressure to deliver returns. I have to give returns to investors. Even if I have to fudge, I will not mind. I mean, again, exaggerating. And also sometimes there is a fear from the regulatory scrutiny. What if I am caught? Let me hide this. Let me hide it as much as I can. Over the years, if it gets exposed, it gets exposed. I'll not reveal it today. So I do some putting things under the carpet and so on.

Just a cartoon to show, this is a desert, very dry place, and the water bottle is being sold at €100 per bottle and the discussion about who are selling. It is unethical, but fortunately, from a business ethics perspective, it is ethical. That's how you justify. You rationalize something which is unethical at the core. Again, another cartoon just to sort of make the point. So I'm not sure if you can read this here. This is a corporate office setting, and they are discussing a complicated issue. So what is stated here is it's a complicated issue, but I think we should take the financial high ground. And what is not stated here is there is a moral high ground and there is a financial high ground. And you choose a financial high ground. Moral high ground can wait.

Wells Fargo case

Let me give you another case study of Wells Fargo. Many of you would know. It's a bank, financial institution, very big bank in US, and lot of miss setting, cross setting happened. Let's look at some details. It was unscathed during the financial crisis, global financial crisis, but huge scandal which came out in 2016. Over 3 million unauthorized bank accounts were created, 5,65,000 unauthorized credit card accounts. Basically, you will just issue, you will cross-sell a product to a existing customer whether the customer needs it or not is not the issue. You have the targets, you are at the branch level, you need to increase the business for the branch.

And we see it happening in our system also. We get so many marketing calls and your number is picked up from various data banks. Forged signatures, false records. It's a long -- there's a Harvard business review has done. Harvard School has actually done a case study on this. You can see the details, and it's very interesting. 5,300 plus employees terminated. CEO resigned. CEO defended the behavior, but he eventually had to resign under tremendous pressure. Billions of dollars were paid in fines, penalties, and settlements. And, of course, it impacted the reputation of the bank.

Now let's look at this Wells Fargo story. If you read the culture and value statement, it's fantastic. They say the same words. We believe in doing the right thing. We believe in doing things in the right manner. We will not compromise on this. Business can wait. All that is mentioned. But in practice, things go astray. So leadership actually promoted aggressive sales goals, incentive structures, sales quotas and bonuses were linked to cross-selling of products.

Team level culture, there was a fear, retaliation, and misconduct was somewhat normalized. Risk management, again, prioritization of business over risk and controls, and overall broader governance and oversight board failed to maintain that. So this is a sort of, I thought it's a good case study because things are going well, bank is growing, But what is not known. What is the real story behind that growth sometimes we need to understand that.

Ethical culture traits

What are the characteristics of ethical culture? It's definitely ethical leadership. You set the tone at the top. You need accountability organization, right from the junior level to the senior level, reporting mechanisms, appraisal systems and so on. And it has to be -- it's not just one person. When things go wrong, it's the whole organization which suffers. Robust governance frameworks, which are required at various levels, right from the board to the lower level.

Transparency. See, it’s one thing to talk about we are a very ethical organization. But what is the transparency around the ethical practices that you practice? My culture and value statement can be just like Wells Fargo. But what is a transparency? And also, if I can point out, if there is evidence around ethical practices, regulators can breathe easy. Regulators can move more to a principle-based regime than a rule-based regime.

Speak up culture. Do you allow if something wrong is being noticed? Can that person really speak up? And if he speaks up, will he be protected? Do you have that sort of framework, whistleblowing and so on. Another point, alignment of incentives with ethical behavior. Or do you reward ethical behavior? Do you recognize ethical behavior? Very important. So as we saw in the Wells Fargo case, again, I'm going back to that, incentives are more on business expansion than the ethical practices.

Education and training on ethics, we never talk about this. In fact, I have been telling Navneet also let's do a conference on ethics only. And you have a good and we took a very good initiative of ethics committee. So as I said, not that our house is on fire. But the point is we need to bring these issues front and center so that enough guardrails are built from within the system where regulators also doesn't have to do much. This is all part of self-regulation.

Collaborative regulation

Now the last piece of my presentation. So towards outcome-based collaborative, sorry, it's a little longest technical sort of phrase here. So what I mean by this is that what truly matters is the investor outcomes and market integrity. We want to work very closely. We've been working very closely with AMFI, and we want to strengthen that further. That is collaborative regulation, and we want to focus on outcomes. And the outcomes are not just that you are ticking the box. Compliance is just one important piece, but what matters is the investor outcomes and market integrity. And this can be built only when we trust each other. The stakeholders have faith in each other.

What are the advantages? You know, if I do something without consulting AMFI, I may come up with a rule which is not very practical. Because AMFI, all the industry players are more familiar with the ground realities, and that is why the need for collaboration. And as some of you know, we've been very closely engaging on any important policy initiative with the industry. So this actually collaboration with the regulator brings us on the same page in terms of what is the purpose, what is it that we are trying to achieve, and it also builds a feedback loop.

Wherever we are, maybe overdoing or underdoing, its industry tells us that look, this is a place where you're going too far and you should not be doing this. And we'll listen to them. Eventually, we'll decide, but we do listen to them. It also provides opportunities for simplification, like you mentioned about too many schemes, so we are working on that piece. It builds ownership of the achievement of outcomes and accountability for observance of the principles. Since it's a collaborative effort, so the ownership is also there. That's another advantage of having this approach.

And one illustration which I would like to point out is on the institutional mechanism to check front running and other fraudulent practices. We've had lot of engagement with AMFI and we asked their proposal, we refined it. Again, many iterations between us. And now we have some feedback once it has been put in practice and we are looking at it how we can further simplify that or how further improve it without compromising on the market integrity issues. So again, just to reemphasize, compliance in itself is necessary. I'm not trying to underplay the significance of compliance. But it is not an end in itself, but it is a means to achieve the desired outcomes in the market.

Key takeaways

So this last slide, I guess, some takeaways. See, it's a big topic, and we can just go on discussing and talking about it for a long time. But in the context of what I mentioned, what are the key takeaways? I think we need to avoid short-termism. We need to focus on building long term. Sorry, I'm quantificating here, but this is something, these are mantras which we need to remind ourselves off and on. So we need to focus on building long-term investor value.

We need to build trust through transparency and simplicity. Keep the things simple. Again, going back to too many schemes or too much jargon and so on.

Beware of the slippery slope. Seemingly small compromises can snowball into bigger issues. And I looked up at what Mr. Raju when Satyam happened. He wrote in his letter to the Board, and all of you know this was a big fraud of about INR 7,000 crores, involved fake invoices, inflated revenues, nonexistent bank balances, understated liabilities. So what Mr. Ramalinga Raju explained, he explained how an initial cover up for poor performance escalated. And I'll just read out. It is from his letter.

So he says, what started as a marginal gap between actual operating profit and the one reflected in the books continued to grow over the years. It has attained unmanageable proportions as the size of the company's operations grew over the years. Then he also says, which became a very famous quote, it was like riding a tiger, not knowing how to get off without being eaten. There's more to it, but I'll pause with that. So the point is any slippery slope has to be arrested in time, has to be dealt with effectively in time before it becomes too big to handle.

This next bullet is more for distributors or the salespeople of AMCs. Apply the family test. Ask yourself whether you would be doing and saying exactly the same thing if your family member was the investor. That's the true test. And it's very simple, right? It's basically facing a mirror. So mere lip service to ethical conduct, as I said, you may have very fantastic and today, AI tools can give you, you don't even have to, they can give you a fantastic statement to keep, and they can design the framework. But what matters here is the implementation. You have to walk the talk. Just the talk and having statements is not good enough.

You must, of course, I would ideally like every AMC to say that we believe in strong ethical behavior in our company. Make a public statement. But don't just leave it at that. You should have very studied framework below that statement in terms of various tools, various mechanisms, various frameworks to achieve that goal, and you should be able to demonstrate that. That's what my next point is. Demonstrate evidence of commitment to fair and ethical behavior, to inspire trust of regulators and other stakeholders, we can sleep easy.

If there's evidence of commitment to fair and ethical behaviour, it becomes -- we are preparing ourselves for more principle-based regime than a very granular rule based regime. I will pause with that. Thank you very much. You've been very patient with me. Thank you.