From Stricter NFO Deadlines to DigiLocker: What’s Changing in Mutual Funds from April 2025

Starting April 1, 2025, the Securities and Exchange Board of India (SEBI) mandates that asset management companies (AMCs) must deploy funds raised via New Fund Offers (NFOs) within 30 business days from the date of unit allotment.

Should an AMC face challenges in deployment, it may seek a one-time extension of another 30 business days, subject to approval from the Investment Committee. However, failure to deploy funds within 60 business days will trigger a set of investor protection measures, including:

• A halt on fresh inflows into the scheme
  
• Exit options for investors without incurring penalties
  
• Mandatory notification to all unit holders

This move is aimed at improving operational discipline and ensuring that investor capital is promptly allocated.

Commission Cap to Prevent Mis-Selling

In a step to curb the mis-selling of schemes for the sake of higher commissions, SEBI has introduced new commission norms for distributors. When investors switch from an existing mutual fund scheme to a new NFO, the distributor will receive the lower of the 2 commissions—either the existing scheme’s or the NFO’s.

This measure is expected to disincentivise the promotion of NFOs based solely on higher commission structures and ensure that recommendations are made in the investor’s best interest.

Introduction of Specialised Investment Funds (SIFs)

One of the key developments under the new regulations is the launch of Specialised Investment Funds (SIFs)—a product category that bridges the gap between traditional mutual funds and portfolio management services (PMS).

Only AMCs that have:

• A minimum of ₹10,000 crore in assets under management (AUM)
  
• At least 3 years of operational history

will be eligible to launch SIFs.

These funds offer flexible investment mandates and may invest in equity, debt, or hybrid strategies, including long-short approaches. A minimum investment of ₹10 lakh is required from each investor, positioning SIFs as a more structured alternative for experienced or high-net-worth individuals.

DigiLocker Integration for Seamless Investment Tracking

From April 1, 2025, investors will be able to store and access their Demat account statements and mutual fund holdings through DigiLocker.

This integration is designed to:

• Simplify access to investment records
  
• Reduce the occurrence of unclaimed financial assets
  
• Facilitate easier document retrieval by nominees

By digitising access, SEBI aims to enhance transparency and streamline portfolio tracking for investors across platforms.

Broader Implications for Investors

These regulatory changes reflect SEBI’s broader intent to:

• Encourage timely fund utilisation
  
• Minimise scope for commission-driven mis-selling
  
• Provide structured and flexible investment options
  
• Improve the digital accessibility of financial documents

Conclusion

While these measures are expected to add an extra layer of protection for investors, they also mark a step forward in the evolution of India’s mutual fund ecosystem.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a personal recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions. 

Mutual Fund investments in the securities market are subject to market risks, read all the related documents carefully before investing.