The Securities and Exchange Board of India (SEBI) regulates mutual funds in India to protect the interests of investors in securities and promote the development of the securities market. The core framework is the SEBI (Mutual Funds) Regulations, 1996, as amended over time, with a comprehensive overhaul approved in December 2025, leading to the new SEBI (Mutual Funds) Regulations, 2026.
Many Indian households weigh mutual funds against familiar savings like fixed deposits or PPF. Mutual funds, being market-linked, involve risks unlike capital-protected options. SEBI’s regulations emphasise transparency, standardisation, and redressal—not return guarantees.
This is general educational content only and not personalised investment advice. Always consult a SEBI-registered investment adviser before making any investment decision.
Key areas include scheme categorisation, disclosures, stewardship responsibilities, expense structures, and grievance mechanisms.
Key SEBI Regulations Protecting Investors
SEBI’s 2017 categorisation created uniform scheme groups to minimise overlaps and support comparison. Schemes divide into equity, debt, hybrid, solution-oriented, and others (including index funds and ETFs).
Examples for equity schemes:
- Large-cap: At least 80% in the top 100 companies by market capitalisation.
- Multi-cap: Minimum 25% each in large-cap, mid-cap, and small-cap.
- Small-cap: At least 65% in small-cap stocks.
Refer to the official 2017 circular for full details: Categorisation and Rationalisation of Schemes.
This exists to help investors select schemes suiting their risk understanding and compare across AMCs.
Example of Equity Scheme Categories
| Category | Key Requirement Example | Purpose of Rule |
|---|---|---|
| Large-Cap | At least 80% in the top 100 companies | Focus on established companies |
| Multi-Cap | Minimum 25% each in large, mid, and small-cap stocks | Ensures balanced exposure across sizes |
| Small-Cap | At least 65% in small-cap stocks | Defines higher growth potential with risks |
Transparency Requirements in Mutual Funds
SEBI mandates disclosures via:
- Scheme Information Document (SID): Comprehensive details on objectives, risks, and costs.
- Key Information Memorandum (KIM): Concise summary.
- Monthly fact sheets: Holdings, performance, and expense details.
These ensure independent assessment of costs, holdings, and risks.
Recent Updates to Expense Structures
SEBI approved revisions in December 2025, introducing the Base Expense Ratio (BER) excluding statutory levies (such as GST, STT, stamp duty). These levies are charged on actuals separately.
BER limits lowered in categories—for example, index funds/ETFs to 0.90%. Brokerage caps rationalised for execution transparency.
These changes, part of the 2026 regulations, aim to clarify costs while preserving safeguards.
Role of the Stewardship Code
SEBI’s 2019 Stewardship Code applies to mutual funds investing in listed equities. AMCs must:
- Formulate monitoring policies.
- Vote on resolutions and disclose records.
- Engage in governance.
Refer to the official circular: Stewardship Code.
This supports long-term governance in holdings.
A Relatable Indian Analogy: The Road Traffic System
SEBI regulations mirror traffic rules on Indian roads—setting categories, disclosures (signboards), and limits (expenses) for orderly operations. Enforcement offers complaint channels, but market conditions (risks) affect participants.
Investor Grievance Redressal: The SCORES Platform
Most issues are resolved at the AMC level. Unresolved ones go to SEBI’s SCORES platform, upgraded for efficiency.
File complaints free at scores.sebi.gov.in. It routes, tracks, and escalates automatically.
Step-by-Step Complaint Process on SCORES
- Register using mobile and PAN.
- Select category (mutual fund) and entity; submit details/documents.
- Receive tracking number for monitoring.
- Entity responds within timeline (typically 21-30 days).
- Request review/escalation if needed.
This supports accessible redressal nationwide.
Key Limitations and Risks to Understand
Mutual funds face market risks without return or capital guarantees. Values fluctuate, possibly causing losses.
SEBI regulations foster transparency and fair processes, but do not remove market risks or ensure outcomes.
Verify independently, review documents, and consult certified professionals.
Last Updated: January 2026
Frequently Asked Questions
What is the role of SEBI in regulating mutual funds?
SEBI sets guidelines on structure, disclosures, costs, and operations to safeguard interests and ensure transparency.
How does scheme categorisation help investors?
It establishes clear boundaries for easier comparison and risk alignment.
What is the SCORES platform?
SEBI’s online system for lodging/tracking complaints against mutual funds or intermediaries.
What are the recent expense ratio changes?
Introduction of Base Expense Ratio excluding statutory levies, with lowered limits in categories like index funds/ETFs to 0.90%.
Does the Stewardship Code guarantee better returns?
No—it encourages AMC monitoring/voting, but outcomes vary with markets.
Are mutual funds risk-free under SEBI regulations?
No. Regulations provide structures, but mutual funds carry market risks unlike PPF or fixed deposits.
What if a SCORES complaint remains unresolved?
Seek a platform review or an eligible arbitration.
When do the 2026 regulations take effect?
Key changes, including expense updates, apply from April 2026 onward.
Key Takeaways
- SEBI’s categorisation standardises schemes for comparability and decisions.
- Disclosures and expense revisions improve cost clarity.
- Stewardship Code and SCORES aid responsible investing and redressal.
- Regulations enhance fairness but do not eliminate market risks or assure returns.
Related Reading
- To understand common distribution practices, revisit Common Mis-selling Tactics to Avoid.
- For insight into oversight, see Role of Trustees and Asset Management Company Structure.
