Changing Landscape of Indian Mutual Fund Industry: Role of Regulators

Abstract

A mutual fund is an investment vehicle that offers multifaceted benefits such as risk minimization through diversification, management of investors’ funds in a professional manner, lesser cost, transparent mechanism, flexibility, easy accessibility, regulatory control, and liquidity. The savings of all types of investors are pooled by the mutual fund. These savings are then invested by fund managers in different securities with the twin objective of risk minimisation and return maximisation. In this way, mutual fund plays a productive role in the Indian economy. Investors are the backbone of the mutual fund industry. As such, protecting investors’ interest for ensuring their spontaneous participation in mutual funds is essential. The regulatory framework of the mutual fund industry of India is a globally competitive one. The year 1991 is a milestone because the function of regulating mutual funds was given to the Securities and Exchange Board of India (SEBI) in March 1991. During the period from 2008 to 2021, the capital market regulator has taken certain investor-friendly measures which are discussed in this paper. Assets under Management (AUM) for the quarter ended 31st December 2019 was Rs. 26.54 lakh crore whereas the AUM for the same period of 2020 was Rs.22.26 lakh crore. This shows a downfall in AUM which may be due to the COVID pandemic. The assets held by individual investors were 52.1% of industry assets in April 2020 while the same was 54.7% in April 2019. Another shocking incident in the Mutual Fund Industry of India due to the COVID-19 pandemic was the shutting down of six debt mutual fund schemes on 23.04.2020 by Franklin Templeton which shocked the investor community. It resulted in huge outflows of over Rs. 8,000 crores in April 2020. The RBI quickly intervened and the RBI announcement of Rs. 50,000 crore special package was made for the interest of the mutual fund investors. The research paper endeavours to focus on the investor-friendly initiatives of the Indian mutual fund regulator SEBI since its inception to the pandemic (COVID-19).