GROWTH OF MUTUAL
FUNDS IN INDIA
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Introduction
“A mutual fund is a trust that pools the savings of a
number of investors with common financial goals”.
The collected money is invested in various
instruments like debentures, shares, etc.
The income generated from these instruments and
the capital appreciation is shared by the investors in
proportion to the number of units owned by them
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Mutual Fund Operation Flow Chart
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History of Mutual Fund
The concept of mutual fund by UTI in the year
1963. Though the growth was slow, but it
accelerated from the year 1987 when non-UTI
players entered the industry.
The mutual fund industry can be broadly put into
four phases according to the development of the
sector.
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First Phase - 1964-87
Unit Trust of India (UTI) was established on 1963 by an Act
of Parliament.
The first scheme launched by UTI was Unit Scheme 1964.
In 1978 UTI was de-linked from the RBI and the Industrial
Development Bank of India (IDBI) took over the regulatory
and administrative control in place of RBI.
At the end of 1988 UTI had Rs.6,700 crores of assets under
management.
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Second Phase - 1987-1993 (Entry of Public Sector Funds)
SBI Mutual Fund was the first followed by Canbank Mutual Fund
(Dec 1987)
Punjab National Bank Mutual Fund (Aug 1989), Indian Bank
Mutual Fund (Nov1989).
Bank of India (Jun 1990), LIC in 1989 and GIC in 1990.
Bank of Baroda Mutual Fund (Oct 1992).
The end of 1993 marked Rs.47,004 as assets under management.
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Third Phase - 1993-2003 (Entry of Private Sector Funds)
A new era started in the Indian mutual fund industry, With the entry of
private sector funds in 1993
The erstwhile Kothari Pioneer (now merged with Franklin Templeton) was
the first private sector mutual fund registered in July 1993.
The 1993 SEBI (Mutual Fund) Regulations were substituted by a more
comprehensive and revised Mutual Fund Regulations in 1996
At the end of January 2003, there were 33 mutual funds with total assets of
Rs. 1,21,805 crore.
The Unit Trust of India with Rs.44,541 crore (Asset value)
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Fourth Phase - since February 2003
This phase had bitter experience for UTI. It was bifurcated
into two separate entities. One is the Specified Undertaking of
the Unit Trust of India with AUM of Rs.29,835 crores (as on
January 2003).
The second is the UTI Mutual Fund Ltd, sponsored by SBI,
PNB, BOB and LIC. It is registered with SEBI and functions
under the Mutual Fund Regulations.
With the bifurcation of the erstwhile UTI which had in March
2000 more than Rs.76,000 crores of AUM and with the setting
up of a UTI Mutual Fund,
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Mutual Fund Monitor:
Institutions 1994-95 1995-96 1998-99
UTI 8120 2470 860
Private sector 1216 375 115
Public sector 949 327 156
Total 10,285 3,172 1,131
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Types of Mutual Fund Schemes
Structu Investment Special
re Objective Scheme
Open Ended
●
Industry
● ●
Growth Funds
specific
Funds ●
Income Funds
schemes
●
Closed Ended ●
Balanced Funds ●
Index schemes
Funds ●
Money Market ●
Sectoral
●
Interval Funds funds
Schemes
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Why Invest in Mutual Funds?
Save through Park Surpluses, Easy Liquidity,
●
Short term Investment, Tax
Mutual Funds Benefits
Invest Have a long term objective, profile
●
through your risk, Mix of debt & equity,
Invest regularly with flexibility
Mutual Funds
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Benefits of Mutual Funds:
Professional Management & Analysis.
Diversification & Divisibility: across companies &
sectors.
Liquidity: Entry & Exit at NAV.
Transparency : Regular Disclosures.
Convenient Administration: Record Keeping.
Low Cost of operation: Lower transaction cost.
Choice of schemes.
Well Regulated: By SEBI.
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Drawbacks of Mutual Funds
No Guarantees
Fees and commissions
Taxes
Management risk
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Rights as a mutual fund unit holder:
Receive statement of accounts within 6 months from the date your
request is received by mutual funds.
Receive information about the investment policies, objectives,
financial position & general affairs of the scheme.
Receive dividend within 30 days of their declaration, receive
redemption proceeds within 10 days from the date of the valid
redemption.
Vote in accordance with the regulations to
Change the Asset Management company.
Wind up the schemes.
Receive information from the trustee about the changes in the
fundamental attributes of the scheme.
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Association of Mutual Funds in India (AMFI):
Association of Mutual Funds in India (AMFI) was incorporated on 22nd
August, 1995.
AMFI is an apex body of all Asset Management Companies (AMC) which
has been registered with SEBI.
AMFI has brought down the Indian Mutual Fund Industry to a professional
and healthy market with ethical lines.
enhancing and maintaining standards.
It follows the principle of both protecting and promoting the interests of
mutual funds as well as their unit holders.
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OBJECTIVES OF AMFI:
It recommends and promotes the top class business practices and
code of conduct.
AMFI interacts with SEBI and works according to SEBIs
guidelines in the mutual fund industry.
AMFI represent the Government of India, the RBI a and other
related bodies on matters relating to the Mutual Fund Industry.
It develops a team of well qualified and trained Agent distributors.
AMFI undertakes all India awareness programme.
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