Sebi introduces Mutual Funds Lite framework for passively managed schemes

Market regulator Securities and Exchange Board of India (Sebi) on Tuesday introduced the Mutual Funds Lite (MF Lite) framework for passively managed mutual funds schemes.

The existing regulatory framework for mutual funds is uniformly applicable for both active and passive MF schemes and does not differentiate on the applicability of provisions related to entry barriers including net worth, track record and profitability.

Under Phase- 1 of implementation of the MF Lite Framework, passive funds based on only domestic equity passive indices with collective assets under management (AUM) of Rs 5,000 crore and above as on December 31 of each Financial Year, will be covered.


All G-Sec/ T-bills/ SDL based domestic target maturity debt passive funds will be covered along with domestic constant duration passive funds with collective AUM exceeding a threshold of Rs 5,000 crore and above as on December 31 of each Financial Year. SDL is State Development Loan, which is a bond issued by a state government.

Apart from this, all gold ETFs, silver ETFs and fund-of-funds (FoFs) based on only gold or silver ETFs will be covered.

The capital markets regulator has also brought those overseas ETFs and FoFs which have single underlying overseas passive fund. The underlying overseas benchmarks should comply with the MF Lite framework.

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

Sebi had formed a working group to study and recommend a relaxed regime for passively managed MF schemes. The recommendations were later deliberated in the Mutual Funds Advisory Committee (MFAC). Following this, the market watchdog amended SEBI (Mutual Funds) Regulations, 1996 through its December 16, 2024 notification.

The provisions of this circular will come into effect from March 16, 2025.