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SEBI bringing in Mutual Fund Light regulation to foster passive fund growth: Ananta Barua

These regulations will provide greater flexibility for index funds and ETFs, enabling them to offer transparency, diversification, and lower costs to investors, he explained

NEW DELHI / May 26, 2023 / 06:06 PM IST
Barua also highlighted other recent changes in the mutual fund industry initiated by SEBI

Barua also highlighted other recent changes in the mutual fund industry initiated by SEBI

SEBI is bringing in Mutual Fund Light regulations that seek to reduce compliance requirements for passive funds, said a whole-time member at the markets regulator.

“To accommodate passive investments, such as index funds and ETFs, SEBI is introducing Mutual Fund Light regulations,” Ananta Barua said at the Mutual Fund Summit organised by ASSOCHAM.

“By easing the compliance burden, SEBI aims to foster the growth of passive investments in the Indian mutual fund industry,” he further explained.

Barua also highlighted other recent changes in the mutual fund industry initiated by SEBI, including the establishment of an exhibition-only platform for direct plans, revision of requirements for sponsoring a mutual fund, and steps taken to increase transparency.

Barua also stated that to further enhance liquidity in the debt market and address concentration risks, SEBI has implemented prudential regulations for open-ended mutual funds, especially debt funds. “These regulations include requirements for minimum liquidity buffers, restrictions on investments in a single company or sector, and self-testing to assess the impact of market movements on the Net Asset Value (NAV) of the fund, “ he added.

Speaking at the same summit, Samar Banwat, Executive Director of the National Securities Depository Ltd (NSDL), stated that India is currently witnessing incredible progress and advancement fueled by innovation, entrepreneurship, and a robust economic structure.

Also read: It's a long process, will take time: Ananta Barua on SEBI’s mutual fund TER proposals

Shri Banwat stated that many investors in mutual funds already possess a Demat account but choose not to receive mutual funds in dematerialised form. He added that holding mutual fund units in a demat account offers several advantages.

“Firstly, there is no need for an additional Know Your Customer (KYC) process since the depository participant has already completed it. Secondly, updating client information becomes easier as it only needs to be done at the demat account level, eliminating the need for multiple updates. Thirdly, nomination and transfer of assets become simpler when mutual funds are held in a demat account. By opting for a demat account to hold mutual funds, investors can benefit from a centralised process and have a single point of contact — the depository participant — for all matters related to their assets. This streamlines the investor experience and reduces the servicing requirements for Asset Management Companies,” he added.

Shubham Raj
Shubham Raj has six years of experience covering capital markets. He primarily writes on stocks with special focus on F&O and PMS-AIF industry.
first published: May 26, 2023 06:06 pm