SEBI to Simplify Scheme Categories; Plans Tarun Yojana for New and Low-Income Investors from Small Towns

At the CII Annual Mutual Fund Summit 2025, Manoj Kumar, Executive Director of SEBI, shared that the regulatory body is reworking mutual fund scheme categorisation. He acknowledged that the current labels used to classify mutual fund schemes are not easily understood, particularly by first-time or retail investors.

Kumar stated that SEBI’s goal is to make investment choices more intuitive and accessible for the average Indian, aiming to boost investor confidence and participation across all segments of society.

Current Categorisation Seen as a Barrier

The existing mutual fund scheme categorisation, though designed with regulatory clarity in mind, is often considered too technical for everyday investors. This complexity may deter new participants, especially in semi-urban and rural regions where financial literacy levels vary significantly.

Simplification of scheme names and categories is expected to address this gap, enabling investors to make more informed and confident decisions.

Clause 24B Under Review: A Move Towards Flexibility

During the same panel discussion, Kumar also addressed Clause 24B of SEBI’s mutual fund regulations, which outlines restrictions on the business activities of asset management companies (AMCs). This clause currently prevents AMCs from acting as trustees of any mutual fund and restricts them from undertaking non-related business activities unless those are advisory or management services aligned with pooled assets like insurance or pension funds.

Describing it as the “only clause that begins with the word ‘Restrictions’,” Kumar noted that it has often been perceived as a constraint on the operational flexibility of AMCs. SEBI is now reviewing this clause to ease unnecessary limitations while still safeguarding investor interests.

Read More: SEBI Plans to Simplify Mutual Fund Norms and Classification

Inclusive Growth with New Products Like Tarun Yojana

SEBI, in collaboration with asset management companies, is also focusing on developing targeted mutual fund products such as the Tarun Yojana. This scheme is aimed at attracting investors from smaller towns and those with modest incomes. The move underscores SEBI’s broader objective to make mutual fund investing more inclusive and to bridge the gap between urban and rural investor participation.

A More Collaborative Regulatory Environment

The panel discussion also highlighted a shift in the regulatory climate. According to participants, the mutual fund industry now enjoys a more cooperative and consultative relationship with SEBI. This open dialogue between regulators and industry players is seen as crucial in ensuring that reforms are both progressive and practical.

Conclusion

SEBI’s renewed approach towards simplifying mutual fund categories and re-evaluating restrictive regulations signals a shift towards greater accessibility and flexibility. By addressing investor comprehension and easing operational hurdles for AMCs, these changes aim to foster wider participation in mutual fund investments, particularly among first-time and small-town investors.

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