Why in the News
The Securities and Exchange Board of India introduced major reforms for the ₹81 lakh crore mutual fund industry to ensure schemes remain true to their stated objectives.
Key Changes
1. Solution-Oriented Schemes Discontinued
- No fresh inflows allowed in retirement and children funds.
- Existing schemes to be merged with similar asset allocation schemes.
- Aim: Remove redundant category and improve clarity.
2. Introduction of Life Cycle Funds
- Goal-based, open-ended schemes.
- Asset allocation shifts automatically over time via glide path.
- Designed around target maturity dates.
3. Higher Exposure Limits
- Up to 35% investment allowed in:
- Gold
- Silver
- Infrastructure Investment Trusts
- Provides equity funds greater flexibility and diversification.
4. Restriction on Portfolio Overlap
- Less than 50% overlap required:
- Between sectoral and thematic funds
- Between equity and sectoral or thematic funds
- Objective: Reduce duplication and ensure differentiated strategies.
5. Relaxation for Contra and Value Funds
- Earlier: Only one of the two allowed per fund house.
- Now: Both can be offered.
Prelims Pointers
- SEBI regulates securities market and mutual funds in India.
- InvITs pool funds for infrastructure projects.
- Life cycle funds follow glide path asset allocation.
- Portfolio overlap norms aim to prevent excessive duplication across schemes.
| [2023] Consider the following statements:
Statement-I: Interest income from the deposits in Infrastructure Investment Trusts (InvITs) distributed to their investors is exempted from tax, but the dividend is taxable. Statement-II: InvITs are recognized as borrowers under the ‘Securitization and Reconstruction of Financial Assets and Enforcement of Security Interest Act, 2002’. Which one of the following is correct in respect of the above statements? (a) Both Statement-I and Statement-II are correct and Statement-II is the correct explanation for Statement-I (b) Both Statement-I and Statement-II are correct and Statement-II is not the correct explanation for Statement-I (c) Statement-I is correct but Statement-II is incorrect (d) Statement-I is incorrect but Statement-II is correct |
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