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Q. Too many rules in Mutual Funds: Comment on too many rules in mutual fund regulation.
Jan 24, 2017 Related to : GS Paper- 3

Ans :


Mutual Fund is an investment programme funded by shareholders that trades in diversified holdings and is professionally managed. Indian mutual fund industry has built up a credible performance record in the lst thirty years. But mutual funds garner a mere 7% of the household financial savings, as majority of players are yet to attain viable scale and profitability. 


Though there are many reasons for the lack of popularity of this investment vehicle, but the restrictive regime of the Securities and Exchange Board governing the advertising and brand-building are main cause of concerns. 

What can be done-?

  • SEBI must ease norms for mutual funds and make them easier for asset management companies (AMCs) to advertise, promote and sell their schemes.
  • Several existing restrictions and standard practices meant for advertisements by AMCs or their schemes are somewhat unnecessary and these should be either removed or relaxed.
  • AMCs should be made to save costs on advertisements, promotions and campaigns, and attract more customers, without compromising the interest of the investors at large.
  • Similarly Mutual funds should simplify their products, use simple nomenclature and explain investment objectives with the risks in simple language at the point of sale.


Mutual funds promote investment regimes in the economy and also bear reasonable profit to investors. In India mutual funds regulation are very strict, hence it garn only 7% of household saving.  Hence there is an need to bring reforms in the mutual fund regulation by easing the norms.

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