Sebi introduces MF Lite framework for passive mutual funds
Subscribe to enjoy similar stories. Index and exchange-traded funds to schemes sponsored by private equity funds will be eligible to be covered under the MF Lite framework on meeting certain conditions as the market regulator aims to simplify the operations of passively managed mutual funds.
Passive funds that invest solely in domestic equity indices—widely tracked by passive funds or used as benchmarks for actively managed funds—will be eligible, provided their collective assets under management (AUM) exceed ₹5,000 crore as of December 31 each year, according to the framework released by the Securities and Exchange Board of India (Sebi) on Tuesday. The Association of Mutual Funds in India (AMFI), in consultation with Sebi, will periodically update the list of domestic equity indices that qualify for MF Lite regulations that come into effect from 16 March 2025.
The initiative will cover a range of passive schemes, including index funds, exchange-traded funds (ETFs), and fund-of-funds (FoFs). Government securities (G-Secs), treasury bills (T-bills), and state development loans (SDL)-based debt passive funds will be included, provided they meet the ₹5,000 crore AUM threshold.
Gold ETFs, Silver ETFs, and FoFs investing in single gold or silver ETFs will be covered, but multi-index FoFs will not be part of the initial phase. Sebi had notified MF Lite regulations on 16 December after proposing a relaxed framework with light-touch regulations for passive mutual fund schemes in July.
Equity-based passive schemes tracking overseas indices must adhere to certain standards, including diversification requirements with a minimum of 10 securities in their equity index portfolio, to be eligible under MF Lite regulations. The framework
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