SEBI Tightens Prudential Norms for Passive Mutual Fund Investments

The Securities and Exchange Board of India (SEBI) has imposed new prudential norms for passive mutual fund schemes, limiting investments in sponsor group companies to 25%. The guidelines aim to enhance transparency and include updates on widely tracked indices published biannually by the Association of Mutual Funds in India (AMFI).

The Securities and Exchange Board of India (SEBI) has introduced stringent prudential norms for passive mutual fund schemes, restricting investments in sponsor group companies to 25% of their net assets.

Announced on Monday, these measures aim to streamline investment norms and ensure transparency for passively managed mutual funds.

SEBI emphasized that equity-oriented ETFs and index funds can invest up to 35% in sponsor group companies, adhering to underlying index weightage.

The AMFI will update and publish the list of widely tracked indices biannually. Schemes not aligned must rebalance within 30 business days of the circular.

Non-compliance could result in penalties, including a ban on launching new schemes and removing exit loads for existing investors.

(With inputs from agencies.)