Sebi Introduces MF Lite to Revolutionize Passive Mutual Funds

Sebi has launched the Mutual Funds Lite (MF Lite) framework to simplify compliance for passively managed schemes. Aimed at encouraging innovation and diversification, the new policy introduces streamlined processes and lighter regulations to facilitate new market entries and enhance liquidity.

India's capital markets regulator, the Securities and Exchange Board of India (Sebi), has unveiled the Mutual Funds Lite (MF Lite) framework. This initiative seeks to simplify compliance for launching passively managed mutual fund schemes, thereby encouraging new entrants and promoting innovation in the mutual fund industry.

The MF Lite framework focuses on passive schemes, such as index funds, exchange-traded funds (ETFs), and funds of funds (FoFs), aiming to streamline processes and reduce entry barriers. Crafted from recommendations by a Sebi-constituted working group and backed by the Mutual Funds Advisory Committee, this new framework is set to come into effect on March 16, 2025.

The rules incorporate distinct eligibility criteria for sponsors and offer eased compliance requirements, like relaxed disclosure norms and optional reporting for trustees. This change is expected to enhance market liquidity and facilitate a smoother entry for innovative players.

(With inputs from agencies.)