Securities and Exchange Board of India (SEBI) has released a draft circular for public comments on the “Categorization and Rationalization of Mutual Fund Schemes.” This initiative aims to revise SEBI’s existing 2017 circular, which standardized mutual fund categories to enhance uniformity and investor understanding. The review is driven by the substantial growth of the mutual fund industry, changing investor preferences, and the emergence of new investment avenues such as REITs and InvITs.
The proposed revisions seek to introduce flexibility for product innovation while maintaining investor protection and clarity across schemes. A key aspect of the draft circular is to address the issue of significant portfolio overlap among various mutual fund schemes, an observation made during SEBI’s compliance checks. The draft circular proposes clear limits to prevent schemes from holding excessively similar portfolios.
Stakeholders and the general public are invited to submit their views and suggestions on the annexed draft circular by August 8, 2025. Comments must be submitted through a specified online web-based form. Detailed instructions for the submission process, including mandatory fields and how to respond to individual proposals, have been provided. Technical support contact information is also available for assistance with the online submission.
*******
Securities And Exchange Boarod of India
DRAFT CIRCULAR FOR PUBLIC COMMENTS
Categorization and Rationalization of Mutual Fund Schemes
1. OBJECTIVE:
1.1. To solicit comments/ views/ suggestions from the public on the draft circular titled “Categorization and Rationalization of Mutual Fund Schemes” placed at Annexure – I.
2. BACKGROUND
2.1. SEBI vide circular dated October 06, 2017 read with circular no. SEBI,’HO,’IMD,’DF3,’CIR,’P,’2020,’228 dated November 06, 2020 on ‘Categorization and Rationalization of Mutual Fund Schemes’ (Categorization circular) standardized the scheme categories and characteristics to bring uniformity, improve comparability, and enhance investor understanding.
2.2. Since then, the mutual fund industry has grown significantly, both in terms of AUM and investor participation. This surge has been accompanied by evolving investor preferences, diversification of asset allocation strategies, and the emergence of new investment avenues such as REITs/InvITs.
2.3. In view of these developments and based on representations received from the industry and AMFI, a need was felt to review the Categorization circular to allow flexibility for product innovation while maintaining investor protection and scheme clarity.
2.4. Further, in order to ensure compliance with the categorization circular, SEBI checks on possible overlap amongst the portfolios of various schemes. It was noted that in case of some schemes, there was a significant overlap of portfolios. It was therefore felt necessary to introduce clear limits to the industry to avoid schemes with similar portfolios.
2.5. The circular has accordingly been revised to improve clarity, introduce new schemes and to address the issue of overlap in portfolios of schemes. This consultation paper seeks suggestions of the public on the proposals mentioned in the draft circular placed at Annexure – I with respect to review of Categorisation circular.
3. PUBLIC COMMENTS:
3.1. Public comments are invited on the annexed draft circular. The comments/ suggestions should be submitted latest by August 08, 2025, through the online web-based form which can be accessed using the following link: https://www.sebi.gov.in/sebiweb/publiccommentv2/PublicCommentAction.do? doPublicComments=yes
3.2. The instructions to submit comments on the consultation paper are as under:
1. Before initiating the process, please read the instructions given on top left of the web form as “Instructions”.
2. Select the consultation paper you want to comment upon from the dropdown under the tab – “Consultation Paper” after entering the requisite information in the form.
3. All fields in the form are mandatory.
4. Email ID and phone number cannot be used more than once for providing comments on a particular consultation paper.
5. If you represent any organization other than the types mentioned under dropdown in “Organization Type”, please select “Others” and mention the type, which suits you best. Similarly, if you do not represent any organization, you may select “Others” and mention “Not Applicable” in the text box.
6. There will be a dropdown of Proposals in the form. Please select the proposals one-by-one and for each of the proposal, please record your level of agreement with the selected proposal. Please note that submission of agreement level is mandatory.
7. If you want to provide your comments for the selected proposal, please select
“Yes” from the dropdown under “Do you want to comment on the proposal” and use the text boxes provided for the same.
8. After recording your response to the proposal, click on “Submit” button. System will save your response to the selected proposal and prompt you to record your response for the next proposal. Please follow this procedure for all the proposals given in the dropdown.
9. If you do not want to react on any proposal, please select that proposal from the dropdown and click on “Skip this proposal” and move to the next proposal.
10. After recording your response to all the proposals, you may see your draft response to all of proposals by clicking on “Check your response before submitting” just before submitting response to the last proposal in the dropdown. A pdf copy of the response can also be downloaded from the link given in right bottom of the web page.
11. The final comments shall be submitted only after recording your response on all of the proposals in the consultation paper .
3.3. In case of any technical issue in submitting your comment through the web based public
comments form, you may contact the following through email with the subject: ” Categorization and Rationalization of Mutual Fund Schemes”
a) Anupma Chadha, GM (anupmac@sebi.gov.in)
b) Jubin Mehta, DGM (jubinm@sebi.gov.in)
c) Ashish Saini, AM (ashishsaini@sebi.gov.in)
Issued on: July 18, 2025
