Northspread
Regulatory updates/NISM Series V-A: Mutual Fund Distributors
31 Dec 2024SEBI Master Circular for Mutual Funds

"MF Lite" light-touch framework introduced for passive schemes

SEBI introduced a relaxed, light-touch regulatory regime — MF Lite — for passively managed schemes (index funds/ETFs tracking large domestic equity or debt indices, Gold/Silver ETFs, and certain FoFs), on the reasoning that provisions built for actively managed funds aren't all necessary for passive ones. A distributor should recognize an MF Lite scheme as sitting under different eligibility/AUM rules than a regular scheme.

From the circular
“As various aspects of the existing regulatory framework may not be necessary for passive funds, a relaxed regime with light-touch provisions "the MF Lite Framework" is introduced only for passive Mutual Fund schemes.”
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In practice

A distributor pitching a large domestic Nifty index fund can mention it likely qualifies for the MF Lite regime once its AUM crosses ₹5,000 Cr as of the prior 31 December — meaning the AMC sponsoring it faces relaxed eligibility norms compared to launching an actively managed scheme. Worth knowing as a due-diligence point, though it isn't a reason to treat the fund differently for the client.

Illustrative scenario written by Northspread — not text from the circular itself.