Evolution of Mutual Fund In India

The ‘Mutual Fund (MF) ’ industry in India started in 1963 with the formation of Unit Trust of India (UTI), at the initiative of the govt of India and Central Bank of India. The history of mutual funds in India are often broadly divided into four distinct phases.

First Phase – 1964-87

Unit Trust of India (UTI) was established in 1963 by an Act of Parliament. It was found out by the Reserve Bank of India and functioned under the regulatory and administrative control of the Reserve Bank of India. In 1978, UTI was de-linked from the RBI and therefore the Industrial Development Bank of India (IDBI) took over the regulatory and administrative control in situ of RBI. The first scheme launched by UTI was Unit Scheme 1964. At the top of 1988, UTI had ` 6,700 crores of assets under management.

Second Phase – 1987-1993 (Entry of Public Sector Funds)

1987 marked the entry of non- UTI, public sector mutual funds found out by public sector banks, life assurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI ‘MF’ was the primary non- UTI ‘MF’ established in June 1987 followed by Canbank ‘MF’ (Dec 87), Punjab commercial bank ‘MF’ (Aug 89), Indian Bank ‘MF’ (Nov 89), Bank of India (Jun 90), Bank of Baroda ‘MF’ (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990. At the top of 1993, the ‘MF’ industry had assets under management of ` 47,004 crores.

Third Phase – 1993-2003 (Entry of personal Sector Funds)

With the entry of personal sector funds in 1993, a replacement era started within the Indian ‘MF’ industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year during which the primary ‘MF’ Regulations came into being, under which all mutual funds except UTI were to be registered and governed. The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the primary private sector ‘MF’ registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations were substituted by a more comprehensive and revised ‘MF’ Regulations in 1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996. The number of ‘MF’ houses went on increasing, with many foreign mutual funds fixing funds in India. The industry has also witnessed several mergers and acquisitions. As at the top of January 2003, there have been 33 mutual funds with total assets of `1,21,805 crores. The UTI of India with ` 44,541 crores of assets under management was way before other mutual funds.

Fourth Phase – since February 2003- April 2014

In February 2003, following the repeal of the UTI of India Act 1963, UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India (SUUTI) with assets under management of ` 29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of UTI of India, functioning under an administrator and under the principles framed by Government of India doesn't come under the purview of the Mutual Fund Regulations. The second is that the UTI ‘MF’ , sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI and functions under the ‘MF’ Regulations. With the bifurcation of the erstwhile UTI which had in March 2000 more than ` 76,000 crores of assets under management and with the setting

up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth.

Moreover, in its effort to increase investor awareness, the industry and the Securities and Exchange Board of India (SEBI) have launched several initiatives. These include literature and campaigns to propagate financial education to varied investor segments (including potential investors), like school and college students, homemakers, executives, etc.

Mutual Fund Industry also could not be saved itself from the financial turmoil of 2009 as securities market tanked. In addition to that the absolution of Entry Load by SEBI also worsen the situation for ‘MF’ industry who was already struggling to maintain its economic viability during 2010 -2013.

Fifth Phase – since May 2014

To ‘re-energies’ the Indian Mutual Fund industry and increase in its penetration, SEBI introduced several measures. With formation of new Government and success measures taken in reversion of negative trend, the situation improved significantly. Hence, since May 2014, the industry has witnessed steady inflow and increase in number of investors as well as of AUM.

‘MF’ Distributors connected themselves to small towns and also enabled investors to invest in appropriate schemes and retain investor in during the course of volatility and experiencing them benefit of investing in Mutual Fund.

With ‘hand holding’ of investors and ‘MF’ Distributors, who convinced them to stay invested and encouraging them to invest in ‘MF’ and when NAV in financial year 2015-16 witnessed steady positive net inflow though same year was not good for Indian securities markets.

For What is Mutual Fund