MF Lite Framework: SEBI simplifies entry and compliance for passive mutual funds - Markets

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Updated Dec 31, 2024 23:13 IST

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MF Lite scheme is any scheme launched by an MF Lite or any other eligible passive scheme as may be specified by the Board from time to time.

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SEBI has introduced a relaxed regime with light-touch provisions “the MF Lite Framework” for passive Mutual Fund schemes.
MF Lite scheme is any scheme launched by an MF Lite or any other eligible passive scheme as may be specified by the Board from time to time.
‘MF Lite’ will cover mutual fund that is having only such index funds, exchange traded funds, fund of funds or other mutual fund schemes.

The market regulator Securities Exchange Board of India ( SEBI ) has introduced “the MF Lite Framework”, relaxed regime with light-touch provisions, for passive Mutual Fund schemes in order to promote ease of entry, encourage new players, reduce compliance requirements, increase penetration, facilitate investment diversification, increase market liquidity and foster innovation.

‘MF Lite’ will cover passive mutual fund that is having only such index funds , exchange traded funds, fund of funds or other mutual fund schemes.

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“The extant regulatory framework for Mutual Funds is uniformly applicable for both active and passive Mutual Fund schemes (“MF Schemes”) and does not differentiate regarding applicability of provisions relating to entry barriers (viz. net worth, track record, profitability), ongoing compliance cost for entities who may be desirous of launching only passive funds,” SEBI said in the press release.

MF Lite scheme is any scheme launched by an MF Lite or any other eligible passive scheme as may be specified by the Board from time to time.

The passive schemes based on the following underlying indices will be covered under phase- 1 of implementation of the MF Lite Framework:

a. Passive funds based on only domestic equity passive indices (broad indices tracked by passive funds or act as primary benchmark for actively managed funds), with collective AUM of INR 5,000 Cr. and above as on December 31 of each Financial Year. AMFI, in consultation with SEBI, shall prescribe the list of such domestic equity indices on a periodic basis.

b. (i) All G-Sec/ T-bills/ SDL based domestic target maturity debt passive funds and (ii) domestic constant duration passive funds based on such debt indices with collective AUM, which exceeds a threshold of INR 5,000 Cr. and above as on December 31 of each Financial Year. AMFI, in consultation with SEBI, shall prescribe the list of such domestic debt indices on a periodic basis.

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c. All Gold ETFs, Silver ETFs and FoFs based on only Gold or Silver ETFs.

d. Overseas ETFs and FoFs having single underlying overseas passive fund, wherein the underlying overseas benchmarks are as permitted under clause 4 of this circular. e. All FoFs investing only in single domestic/ overseas index, wherein the reference benchmarks of underlying passive funds are as permitted under clause 3 (in case of domestic underlying indices) and clause 4 (in case of overseas underlying indices) of this circular.

f. All FoFs investing in more than one index shall not be covered under the MF Lite framework under the phase 1 of implementation.

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