MF Lite: Sebi proposes rules to make launching low-cost index funds easier

Markets watchdog SEBI has proposed a relaxed regulatory framework for passively managed mutual fund (MF) schemes to reduce compliance requirements and lower costs for launching low-cost index funds. Currently, all mutual funds follow the same rules, but the new “MF Lite Regulations” aim to simplify this for funds that only manage passive schemes like ETFs and index funds. Key changes include lower entry barriers for new firms, with two eligibility routes: a simpler main route with a ₹35 crore net worth requirement and an alternative route with a ₹75 crore net worth and a 3-year lock-in period for sponsors. SEBI seeks public feedback on the proposal until July 22, aiming to increase market competition and offer more choices for investors.