Under the SEBI Mutual Fund Regulations (Chapter X), what defines an 'MF Lite' entity?

[ A ]A mutual fund registered to launch and manage exclusively passive schemes such as index funds, ETFs, and eligible fund of funds[ CORRECT ]

[ B ]A mutual fund that manages only high-risk derivative and private equity funds

[ C ]A distributor platform that sells mutual fund schemes without charging any commission

[ D ]A micro-finance institution offering unsecured personal loans up to Rs. 50,000

Takeaway

Option A is correct: A mutual fund registered to launch and manage exclusively passive schemes such as index funds, ETFs, and eligible fund of funds

Derivation

Under Chapter X of the SEBI (Mutual Funds) Regulations, 2026, 'MF Lite' refers to a mutual fund granted registration to offer only passive investment vehicles, including index funds, exchange-traded funds (ETFs), and eligible fund of funds schemes. The framework provides relaxed, streamlined compliance requirements suitable for passive fund management. This question evaluates knowledge of recent regulatory developments. The primary pitfall is confusing MF Lite with zero-commission distribution platforms or micro-lending entities.

Why the others fail

B — A mutual fund that manages only high-risk derivative and private equity funds

MF Lite is strictly prohibited from managing high-risk active derivative or private equity funds; it is exclusively for passive products.

C — A distributor platform that sells mutual fund schemes without charging any commission

MF Lite is an asset management entity registration framework, not an intermediary distribution or transaction portal.

D — A micro-finance institution offering unsecured personal loans up to Rs. 50,000

Micro-finance lending entities fall under RBI banking regulations and have no connection to SEBI's MF Lite framework.