Growth of Mutual Fund Industry in India

From a statutory body to an industry

India's mutual fund industry began in 1963, when the Unit Trust of India was set up as a statutory body under an Act of Parliament. For three decades the field was not open to private-sector fund houses.

That changed in 1993, when SEBI issued its first Mutual Fund Regulations and private-sector fund houses were allowed to set up mutual funds.

Three generations of regulations

The 1993 Regulations were replaced by the 1996 Regulations, which governed the industry for about three decades. Those in turn were replaced by the SEBI (Mutual Funds) Regulations, 2026, in force from 1 April 2026, which work together with SEBI's Master Circular for Mutual Funds of 20 March 2026.

A reader meeting older books or web pages therefore needs to check dates. A statement that was accurate under the 1996 Regulations may no longer be the rule.

Rule changes that shaped the product

Three changes are worth knowing. Entry load, a charge deducted at the time of purchase, was abolished in 2009. Direct plans, which carry no distributor commission, have been compulsory in every scheme since 1 January 2013; a direct plan has the same portfolio as the regular plan of the same scheme but a lower expense ratio and a separate, higher NAV.

SEBI's scheme categorisation of October 2017 was replaced by a circular of 26 February 2026 with 40 scheme categories: 13 equity, 17 debt, 7 hybrid, 1 life-cycle and 2 other. A scheme's name must match its category, and existing schemes had to comply by 26 August 2026.

Reading the size figures

Industry assets under management stood at ₹87.08 lakh crore across 28.35 crore folios as of August 2026 (AMFI). In that month, contributions through systematic investment plans (SIPs) were ₹32,297 crore, from 10.02 crore contributing SIP accounts (AMFI). These figures change every month.

A folio is an account, and one investor can hold several, so the number of investors is smaller than the number of folios. Size is also not a measure of safety: every scheme carries market risk, however large the industry.

Rules at a glance

Key points

• The Unit Trust of India was set up under an Act of Parliament in 1963, the start of the industry.
• SEBI's first Mutual Fund Regulations (1993) opened the industry to private-sector fund houses.
• The 1993 Regulations were replaced by the 1996 Regulations, and those by the SEBI (Mutual Funds) Regulations, 2026 from 1 April 2026.
• Direct plans, with no distributor commission, have been compulsory in every scheme since 1 January 2013.
• SEBI's categorisation of 26 February 2026 has 40 scheme categories and replaced the October 2017 categorisation.
• Industry assets were ₹87.08 lakh crore across 28.35 crore folios as of August 2026 (AMFI); a folio is an account, not an investor.

Common misunderstandings

• 28.35 crore folios does not mean 28.35 crore investors: a folio is an account, and one investor can hold several.
• A large industry is not a safe one: size is not a measure of safety, and every scheme carries market risk.
• The 1996 Regulations and the 2017 categorisation are no longer the rulebook: the 2026 Regulations and the categorisation of 26 February 2026 have replaced them.
• A direct plan is not a different portfolio: it is the same scheme without distributor commission, with a lower expense ratio and a separate NAV.

Questions people ask