SEBI Categorization — From 36 to 40 Categories

Over the past two decades, the Indian mutual fund industry witnessed what was often called the "scheme jungle" problem. Before 2017, there were over 2,000 mutual fund schemes in India and most investors — even experienced distributors — could not tell the difference between a "Growth Fund," an "Opportunities Fund," and a "Select Fund" from the same AMC. Two large-cap funds from the same AMC would hold virtually identical portfolios but carry different names and different expense ratios. The October 2017 circular by SEBI did three revolutionary things: first, it defined exactly what each category means with strict portfolio composition rules (for example, a Large Cap fund MUST hold at least 80% in the top 100 stocks by market cap — no ambiguity). Second, it limited each AMC to one scheme per category, which meant AMCs had to merge dozens of overlapping schemes. Third, it created a uniform naming convention so investors can compare apples to apples across AMCs. An important nuance often overlooked is how this circular fundamentally changed fund recommendations. Before 2017, a distributor could recommend five "large-cap" funds from the same AMC. Now, each AMC has exactly one. This simplifies the selection process — compare the single large-cap offering from each AMC and pick the best one for the client. With India's mutual fund industry now managing over ₹82 lakh crore in AUM, more than 27 crore folios, and monthly SIP inflows exceeding ₹29,000 crore, the framework continues to evolve. The SEBI (Mutual Funds) Regulations 2026 (effective April 1, 2026) expand the classification to 40 categories, adding new categories like Life-Cycle Funds and Sectoral Debt Funds, while discontinuing Solution-Oriented schemes. The TER framework is also changing to a Base Expense Ratio (BER) model with separate levies.