MF Categorisation
SEBI proposes changing categorisation of MF schemes to prevent overlap
This story was originally published at 21:38 IST on 18 July 2025
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NEW DELHI – The Securities and Exchange Board of India has proposed a review of the categorisation and rationalisation of mutual fund schemes. The regulator aims to introduce clear limits to avoid overlap of schemes with similar portfolios.
In a consultation paper, for which public comments are invited by Aug. 8, SEBI said that based on representations received from the mutual fund industry, "a need was felt to review the categorisation circular to allow flexibility for product innovation while maintaining investor protection and scheme clarity."
The regulator has sought feedback on whether mutual funds should be allowed to offer both value and contra funds, provided that the portfolio overlap between the two does not exceed 50%. SEBI has proposed allowing mutual funds to invest the residual portion of their equity category schemes in a diversified mix of asset classes such as debt, gold, and silver, subject to regulatory limits for each asset class.
For debt funds, the regulator has asked if the name of the debt category scheme should be changed from "Duration" to "Term" to provide better nomenclature that enhances investor clarity. Similarly, SEBI has asked if the nomenclature of the "Low Duration Fund" should be changed to "Ultra Short to Short Term Fund" to better reflect the investment objective and improving investor clarity.
SEBI has asked if Arbitrage Fund category scheme should be allowed to take exposure in debt instruments only in government securities with a maturity of less than one year and in repos backed by government bonds. It has also proposed mandating the net equity exposure and arbitrage exposure between 15%-40% in the equity saving scheme category.
The regulator has also sought feedback on whether the term 'fund' in the scheme name should be changed to 'scheme'. End
Reported by Shubham Rana
Edited by Akul Nishant Akhoury
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