SEBI/HO/IMD/PoD2/P/CIR/2024/183 December 31, 2024

CIRCULAR SEBI/HO/IMD/PoD2/P/CIR/2024/183 December 31, 2024 To All Mutual Funds (MFs)/ All Asset Management Companies (AMCs)/ All Trustees of Mutual Funds/ Association of Mutual Funds in India (AMFI) Madam/ Sir, Subject: Introduction of a Mutual Funds Lite (MF Lite) framework for passively managed schemes of Mutual Funds The extant regulatory framework for Mutual Funds is uniformly applicable for both active and passive Mutual Fund schemes ("MF Schemes") and does not differentiate regarding applicability of provisions relating to entry barriers (viz. net worth, track record, profitability), ongoing compliance cost for entities who may be desirous of launching only passive funds. Accordingly, as various aspects of the existing regulatory framework may not be necessary for passive funds, a relaxed regime with light-touch provisions "the MF Lite Framework" is being introduced only for passive Mutual Fund schemes, with an intent to promote ease of entry, encourage new players, reduce compliance requirements, increase penetration, facilitate investment diversification, increase market liquidity and foster innovation. In this regard, a Working Group was formed by SEBI to study and recommend a relaxed regime for passively managed MF schemes. The recommendations of the Working Group were deliberated in the Mutual Funds Advisory Committee (MFAC) and subsequent to that, SEBI (Mutual Funds) Regulations, 1996 ("MF Regulations") was amended vide notification No. SEBI/LAD-NRO/GN/2024/221 dated December 16, 2024. In view of the above, various provisions relating to MF Lite Framework are covered under the following paragraphs. 3. Categories of passive schemes to be covered under MF Lite framework Regulation 79(1)(b) of Chapter XI of the MF Regulation defines "MF Lite" as a mutual fund t

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