Mutual funds Regulation In India

August 09, 2019
mutual funds in india

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This article is written by Richa Singh of Faculty of Law, Aligarh Muslim University. In this article, she has discussed the meaning of mutual funds and its working in India along with the regulations by which it is managed in the country.


The Indian industry of mutual funds is evolving continuously. There are several Indian industries bodies which are investing in investor education. Investing in Mutual funds is still considered a risky option. The types of mutual fund options available to an investor make it one of the most flexible and comprehensive investments that are helpful for the people who are willing to invest.

The regulations of RBI and SEBI on mutual funds make it a safer option to maximize your profits and invest money in something useful.

Concept of mutual funds in India

The name itself suggests that a ‘Mutual fund’ is like an investment channel that helps several investors to combine their resources to purchase stocks, bonds, and other securities for their earnings. 

These combined funds which are referred to as Assets Under Management (AUM) are then invested in a mutual fund company’s manager who has expertise in it. The mutual fund company is called as an Asset Management Company (AMC).

This combined underlying holding of the fund is called the ‘portfolio’ and each investor owns some portion of this portfolio and this portion which the person holds is in the form of units.

History of mutual funds in India

Objective of mutual funds

The objectives of mutual funds are as follows:

What is a mutual fund?

A mutual fund is a commercial product that invests in stocks or bonds. 

A mutual fund is a pool of investment which is managed professionally for the purpose of purchasing various securities and culminating them into a strong portfolio that will give you attractive returns over and it will be above the risk-free returns which are currently being offered by the market. 

If you own a mutual fund then it is like getting a slice of an apple. Just like that the investors get units of the fund which are in proportion to their investments. 

For example, if there is a mutual fund that has total assets of $5000 and someone invests $500, he/she will receive 10% units of that fund.

Mutual funds meaning

How mutual funds work in India

MF Utility

Structure of mutual fund in India

Types of mutual funds

Mutual fund types can be classified as:

Based on Asset Class

Based on Structure

Based on Investment goals

Based on Risks

Specialized Mutual Fund Types

                     Click Above

Regulation of Mutual Funds in India

The term “regulation” means a rule or directive made and controlled by an authority. 

Who regulates mutual funds in India

Advantages of mutual funds

Mutual fund benefits

There are various benefits of investing in Mutual Funds, such as:

Investing mutual funds in India

Association of mutual funds in India

The Association of Mutual Funds in India has been established to develop the industry of Mutual funds in India. Its aim is to make this industry on professional, ethical and healthy lines. This is done to enhance this industry and maintain standards so that the interests of the shareholders are promoted and protected. 

AMFI was incorporated on 22nd August 1995 as a non-profit organization.

It is an association of SEBI registered mutual funds in India of all the registered Asset Management Companies.

AMFI Registration

Who can apply for registration?

Only the below mentioned people can apply for the AMFI Registration Number (ARN).

Requirements for registering with AMFI

Allotment of ARN 

Renewal of ARN

Mutual fund investment online

Mutual Funds RBI

The Reserve Bank of India (RBI) was established in 1935 through the Reserve Bank of India Act, 1934. It is the apex bank of the country. Its function is to formulate and regulate monetary policies, thus, plays a key role in maintaining stability and ensure the smooth flow of credit in all the productive sectors of the country. It has prescribed a code of conduct for banking and financial systems within the country.

The guidelines of the RBI for Mutual Funds are as follows:

Sebi guidelines for mutual funds

Mutual funds are regulated by the Securities and Exchange Board of India (SEBI). SEBI formulated the Mutual Fund Regulation in the year 1996. 

These regulations and guidelines must be followed in order to set up a mutual fund and maintaining it. 

How to get registered as a Mutual Fund?

The SEBI (Mutual Funds) Regulations, 1996

For the purpose of getting a certificate of registration, the following must be fulfilled by the applicant:

The ‘sound track record’ means:

Important SEBI Regulations for mutual funds

Are Mutual funds allowed to do cryptocurrency trading?

Cryptocurrency is a digital currency that is not monitored by any central authority. It is a medium of exchange that uses cryptography for making and securing transactions and to manage new units. It has no legal sanction and is not backed by the government. 

In the case of Tata Consultancy Services v. State of Andhra Pradesh , the Court stated that a commodity means a good of any kind which can be used or is an article of commerce. Hence, Cryptocurrency can be seen as a commodity. Allowing cryptocurrency in trading would mean to legalize commodity derivatives trading by mutual funds.

Advantages of using cryptocurrency for mutual funds 

RBI’s stand on the use of cryptocurrency in mutual funds

Will it be helpful to allow transactions using cryptocurrency in India?

Can NRIs Invest in Mutual Funds

In India, NRIs can invest in mutual funds and it can be done according to the preference of the investors. It can be made on a repatriable basis i.e. invested in units of domestic mutual funds or can be done on a non-repatriable basis i.e. in units of money market mutual funds and domestic mutual funds in India.

The RBI has granted permission to offer mutual funds schemes on repatriation basis but with the following terms & conditions:


Mutual funds pave a way to maximize the earnings for future financial needs. The use of cryptocurrency should be allowed in mutual fund investments so that it becomes easier for investors to make instant transactions. The use of cryptocurrency, though, is illegal according to the Foreign norms of the country but it should be considered as it will help in developing the mutual fund industry in India. 


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