The Securities Board of India (SEBI) is actively reviewing the clause 24(b), which doesn't allow MFs to enter any other business other than management and advisory services, says Manoj Kumar, ED, SEBI. He said: “Regulation 24(b) is one of the serious obstacles for the growth of mutual fund industry. So we are doing a significant review of it.” Talking at the CII mutual fund summit 2025, he also said that the regulator is also working on simplification of scheme categorization for mutual funds for better MF reach and total expense ratio (TER) that is annual cost of managing the mutual funds. He said," To increase the penetration of MF to the smaller cities it is very important that the name of the scheme of mutual funds is in such a manner that it is easily understood by everyone." The regulator did not specify the time when the changes in these regulations will be announced, but he assured that active work is ongoing on these regulations. According to Regulation 24(b), "The asset management company shall not undertake any other business activities except activities in the nature of portfolio management services, management of offshore funds, advisory services, and such other activities as financial services as may be permitted by the board, provided that the asset management company may itself or through its subsidiaries undertake such activities as mentioned above, subject to compliance with the conditions that the Board may specify from time to time." Kumar said that there has been some feedback that recent regulatory changes have caused some discomfort in the market and we are definitely looking into it. He said, "Some re-examination has already started especially on the institutional mechanism framework, SEBI is reviewing such framework to avoid discomfort." He also raised his concern about the low penetration of mutual funds but mentioned that the regulator has been taking significant steps to increase the reach of mutual funds to the lowest strata of society. He said, “The regulator has taken initiatives like Rs 250 SIP or Chhoti SIP, B-30 incentives, Tarun yojana for young children, but there is still more that can be done for penetration.” Kumar also stated that the regulator is shifting its focus from a KRA (KYC registration agency) based system to a more cooperative regulatory approach where it will strive to create an environment for collaboration with the industry. He said, "It is not that we are not doing it today; we are a highly collaborative regulator, and many of the changes we have made have been through co-creation. Therefore, we are placing more emphasis on this approach, which is why we have adopted it, relying on the industry's creativity and credibility of partners, and aiming to provide more flexibility for innovation."
