3.3 Growth of the Mutual Fund Industry in India

NISM-Series-V-A: Mutual Fund Distributors Certification Examination Exam

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1 Chapter 1: Introduction & Exam Overview

1.1 About the NISM-Series-V-A Examination 1.2 The 12-Unit Curriculum Map and a Study Plan

2 Chapter 2: Investment Landscape

2.1 Investors and Their Financial Goals 2.2 Savings or Investments? 2.3 Different Asset Classes 2.4 Investment Risks 2.5 Risk Measures and Management Strategies 2.6 Behavioural Biases in Investment Decision Making 2.7 Risk Profiling 2.8 Asset Allocation and Do-It-Yourself versus Professional Help

3 Chapter 3: Concept and Role of a Mutual Fund

3.1 Concept of a Mutual Fund 3.2 Classification of Mutual Funds 3.3 Growth of the Mutual Fund Industry in India

4 Chapter 4: Legal Structure of Mutual Funds in India

4.1 Structure of Mutual Funds in India 4.2 Key Constituents of a Mutual Fund 4.3 AMC Organisation Structure and Service Providers 4.4 Role and Function of AMFI

5 Chapter 5: Legal and Regulatory Framework

5.1 Role of Regulators in India 5.2 Role of SEBI and the Mutual Fund Regulations 5.3 Due Diligence Process by AMCs for Distributors 5.4 Investor Grievance Redress Mechanism 5.5 AMFI Code of Conduct for Intermediaries

6 Chapter 6: Scheme Related Information

6.1 Mandatory Documents I: Scheme Information Document and Statement of Additional Information 6.2 Mandatory Documents II: Key Information Memorandum and the Advertisement Code 6.3 Non-Mandatory Disclosures

7 Chapter 7: Fund Distribution and Channel Management Practices

7.1 The Role and Importance of Mutual Fund Distributors 7.2 Different Kinds of Mutual Fund Distributors 7.3 Modes of Distribution 7.4 Pre-requisites to Become a Distributor of a Mutual Fund 7.5 Revenue for a Mutual Fund Distributor 7.6 Commission Disclosure Mandated by SEBI 7.7 Distributors versus Investment Advisers, Nomination Facilities and Change of Distributor

8 Chapter 8: Net Asset Value, Total Expense Ratio and Pricing of Units

8.1 Fair Valuation Principles 8.2 Computation of Net Assets of a Scheme and NAV 8.3 Dividends and Distributable Reserves 8.4 Entry and Exit Load and Its Impact on NAV 8.5 The Expense Ratio Framework: Base Expense Ratio, Brokerage and Statutory Levies 8.6 Key Accounting and Reporting Requirements 8.7 NAV, Total Expense Ratio and Pricing of Units for the Segregated Portfolio

9 Chapter 9: Taxation

9.1 Applicability of Taxes in Respect of Mutual Funds 9.2 Capital Gains on Mutual Fund Units 9.3 Dividend (IDCW) Income and Tax Deducted at Source 9.4 Stamp Duty and Securities Transaction Tax on Mutual Fund Units 9.5 Setting Off Capital Gains and Losses under the Income Tax Act 9.6 Tax Benefit under Section 80C and Applicability of GST

10 Chapter 10: Investor Services

10.1 The New Fund Offer Process 10.2 New Fund Offer Price and Ongoing Offer Price for Subscription 10.3 Investment Plans and Services 10.4 Allotment of Units and Account Statements 10.5 Mutual Fund Investors: Who Can Invest 10.6 Filling the Application Form for Mutual Funds 10.7 Financial Transactions with Mutual Funds 10.8 Cut-Off Time and Time Stamping 10.9 KYC Requirements for Mutual Fund Investors 10.10 Systematic Transactions and Their Operational Aspects 10.11 Non-Financial Transactions, Special Investor Categories and Turnaround Times

11 Chapter 11: Risk, Return and Performance of Funds

11.1 General and Specific Risk Factors 11.2 Factors That Affect Mutual Fund Performance 11.3 Drivers of Returns and Risk in a Scheme 11.4 Measures of Returns 11.5 SEBI Norms Regarding Representation of Returns 11.6 Risks in Fund Investing: The Investor's Perspective 11.7 Measures of Risk and Provisions Relating to Credit Risk

12 Chapter 12: Mutual Fund Scheme Performance

12.1 Benchmarks and Performance 12.2 Price Return Index or Total Return Index 12.3 Basis of Choosing an Appropriate Performance Benchmark 12.4 Benchmarks for Equity Schemes 12.5 Benchmarks for Debt Schemes and Other Schemes 12.6 Quantitative Measures of Fund Manager Performance 12.7 Tracking Error and Scheme Performance Disclosure

13 Chapter 13: Mutual Fund Scheme Selection

13.1 Scheme Selection Based on Investor Needs, Preference and Risk Profile 13.2 Risk Levels in Mutual Fund Schemes 13.3 Scheme Selection Based on Investment Strategy 13.4 Selecting a Scheme Across AMCs or Within a Scheme Category 13.5 Selecting Options in Mutual Fund Schemes and Do's and Don'ts

3.3 Growth of the Mutual Fund Industry in India

Key Takeaways Explain This Topic AI

Unit Trust of India was set up in 1963 and held a statutory monopoly until 1987.

Public sector banks and insurers were permitted to launch mutual funds from 1987.

Private sector and foreign participation was allowed from 1993, when the first SEBI Mutual Fund Regulations were issued.

UTI was bifurcated in 2003, after which all mutual funds operate under a single SEBI regulatory framework.

Systematic investment plans and B-30 penetration efforts have driven the retail-led growth of the last decade.

Last updated: August 2026

Phase One: The UTI Monopoly, 1963 to 1987

The industry began with the Unit Trust of India , established in 1963 by an Act of Parliament at the initiative of the Government of India and the Reserve Bank of India. UTI was not merely the first mutual fund; it was for 24 years the only one.

Its flagship product, Unit Scheme 1964 (US-64) , became the vehicle through which a generation of Indian households first met market-linked investing. UTI operated under its own statute rather than under a securities regulator, and disclosure norms were far lighter than anything the current framework requires.

Phase Two: Public Sector Entry, 1987 to 1993

In 1987 the government permitted public sector banks, the Life Insurance Corporation and the General Insurance Corporation to establish mutual funds. SBI Mutual Fund was the first non-UTI fund, followed by Canbank, Punjab National Bank, Indian Bank, Bank of India, Bank of Baroda, LIC and GIC.

This phase introduced competition and expanded distribution through bank branch networks, though the entire industry remained state-owned.

Phase Three: Private Sector and SEBI Regulation, 1993 to 2003

1993 is the decisive year. Two things happened together:

Private sector mutual funds were permitted , including joint ventures with foreign asset managers, bringing international investment processes into the Indian market.

The first SEBI Mutual Fund Regulations were issued , creating for the first time a comprehensive regulatory framework covering registration, the trust structure, investment restrictions, valuation and disclosure.

Those regulations were replaced by the SEBI (Mutual Funds) Regulations, 1996 , which governed the industry for nearly three decades. Crucially, UTI remained outside this framework, so two different regimes operated side by side — an inconsistency that the next phase resolved.

Phase Four: Bifurcation of UTI and Consolidation, from 2003

Following stress in US-64, UTI was bifurcated in 2003 into:

The Specified Undertaking of the Unit Trust of India (SUUTI) , which took the assured-return legacy schemes and remained outside SEBI's mutual fund framework, and

UTI Mutual Fund , sponsored by SBI, PNB, Bank of Baroda and LIC, registered with SEBI and subject to the same regulations as every other fund .

This is the structural significance of 2003: from that point the industry operated under one framework for all participants . The phase that followed brought consolidation through mergers and acquisitions and the entry and exit of several foreign sponsors.

The Current Phase: Retail Participation

The last decade has been driven by retail investors rather than institutions, through four developments:

Systematic investment plans. Monthly SIP contributions have converted mutual fund investing from an episodic lump-sum decision into a standing household habit, and have made industry flows markedly more stable through market cycles.

Digital onboarding. Electronic KYC, online transaction platforms and exchange-based distribution removed most of the paperwork friction.

Direct plans. Introduced in 2013, giving investors a lower-cost route without distribution commission.

Geographic widening. Sustained effort to grow beyond the top 30 cities, supported by regulatory incentives for B-30 inflows and by investor awareness programmes funded from scheme expenses.

Timeline

Year Development
1963 UTI established by Act of Parliament
1964 Unit Scheme 1964 launched
1987 Public sector banks, LIC and GIC permitted; SBI Mutual Fund is first non-UTI fund
1993 Private sector permitted; first SEBI Mutual Fund Regulations issued
1996 SEBI (Mutual Funds) Regulations, 1996 replace the 1993 regulations
2003 UTI bifurcated into SUUTI and UTI Mutual Fund; single framework for all funds
2013 Direct plans introduced
2017 Scheme categorisation and rationalisation framework introduced

2026 SEBI (Mutual Funds) Regulations, 2026 come into force from 1 April, repealing the 1996 Regulations; revised categorisation circular issued in February

Where the Industry Stands

The structure that has emerged is a heavily regulated, disclosure-driven industry in which every scheme is marked to market daily, portfolios are published monthly, expenses are capped by regulation, and the entire distribution channel must hold a certification. Understanding this history matters for the exam in one specific way: it explains why so many rules exist. Assured-return schemes, opaque valuation and inconsistent regulation each produced investor loss, and each produced a rule in response.

The Scale Reached

Numbers make the trajectory concrete. Assets under management of the Indian mutual fund industry stood at approximately INR 82.22 lakh crore as on 30 June 2026 , with average assets under management for that month of about INR 84.18 lakh crore , on AMFI's published data. Monthly systematic investment plan contributions were around INR 31,781 crore in June 2026 , the fifth consecutive month at or above the INR 31,000 crore level.

The SIP figure is the more revealing of the two. A monthly flow of that size arriving irrespective of market level is what has made industry inflows structurally steadier than they were when the business depended on lump sums timed to sentiment. It is also the clearest single measure of what the distribution channel has built, since the overwhelming majority of those mandates were opened for investors by someone.

Use published figures with care. AUM and SIP numbers change every month and are the fastest-ageing facts in this syllabus; quote them with the month attached, and check AMFI's current monthly note before repeating them to an investor.

Structural Additions of the Last Two Years

Three framework-level developments belong on the timeline because they change what the industry is permitted to offer:

MF Lite — a lighter-touch regulatory framework for fund houses running only passive schemes, recognising that index replication involves far less discretion than active management.

Specialised Investment Funds (SIF) — a category positioned between mutual funds and portfolio management services, with higher minimum investment and wider strategy latitude than a mutual fund scheme.

The SEBI (Mutual Funds) Regulations, 2026 — which consolidate both of the above into the main body of the regulations rather than leaving them to stand as separate circulars, alongside the revised expense-ratio architecture.

The pattern is consistent with everything before it: the framework widens to admit new structures, and each new structure arrives with its own disclosure obligations attached.