Overview of MF Industry & Growth Prospects


30 July, 2019



The mutual fund industry in India started in 1963 with the formation of Unit Trust of India, at the initiative of the Government of India and Reserve Bank of India. The history of mutual funds in India can be broadly divided into four distinct phases.


First Phase - 1964-1987


Unit Trust of India (UTI) was established in 1963 by an Act of Parliament. It was set up by the Reserve Bank of India and functioned under the Regulatory and administrative control of the Reserve Bank of India. 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. The first scheme launched by UTI was Unit Scheme 1964. At the end of 1988 UTI had Rs. 6,700 crores of assets under management.



Second Phase - 1987-1993 (Entry of Public Sector Funds)


1987 marked the entry of non-UTI, public sector mutual funds set up by public sector banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC). SBI Mutual Fund was the first non-UTI Mutual Fund established in June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while GIC had set up its mutual fund in December 1990.

At the end of 1993, the mutual fund industry had assets under management of Rs. 47,004 crores.


Overview of MF Industry & Growth Prospects

Credit : freepik.com



Third Phase - 1993-2003 (Entry of Private Sector Funds)


With the entry of private sector funds in 1993, a new era started in the Indian mutual fund industry, giving the Indian investors a wider choice of fund families. Also, 1993 was the year in which the first Mutual Fund Regulations came into being, under which all mutual funds, except UTI were to be registered and governed. 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. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.

The number of mutual fund houses went on increasing, with many foreign mutual funds setting up funds in India and also the industry has witnessed several mergers and acquisitions. As at the end of January 2003, there were 33 mutual funds with total assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs. 44,541 crores of assets under management was way ahead of other mutual funds.



Fourth Phase - since February 2003


In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into two separate entities. One is the Specified Undertaking of the Unit Trust of India with assets under management of Rs. 29,835 crores as at the end of January 2003, representing broadly, the assets of US 64 scheme, assured return and certain other schemes. The Specified Undertaking of Unit Trust of India, functioning under an administrator and under the rules framed by Government of India and does not come under the purview of the Mutual Fund Regulations.

The second is the UTI Mutual Fund, 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 assets under management and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund Regulations, and with recent mergers taking place among different private sector funds, the mutual fund industry has entered its current phase of consolidation and growth.



Note:


Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit Trust of India effective from February 2003. The Assets under management of the Specified Undertaking of the Unit Trust of India has therefore been excluded from the total assets of the industry as a whole from February 2003 onwards.



The Present


Mutual fund investment still accounts for only 7% of total investments by individual investors in India and AUM: GDP ratio is a mere 11%, (In contrast the size of MF industry in USA is $20 trillion and growing which is same as it's GDP (i.e. 100% of GDP), indicating MF industry in India still has the potential to grow 5-7 fold), an indication of the tremendous untapped potential.

Technology is enhancing the growth of mutual funds in the form of paperless transactions (for eg. e-KYC, BSE Star MF, NSE NMFII, digital wallets).

The Association of Mutual Funds in India (AMFI) is dedicated to developing the Indian Mutual Fund Industry on professional, healthy and ethical lines and to enhance and maintain standards in all areas with a view to protecting and promoting the interests of mutual funds and their unit holders.

AMFI was incorporated in 1995, as a non-profit organisation. AMFI is the association of SEBI registered mutual funds in India which are managed by registered Asset Management Companies. As of now, all the 44 Asset Management Companies that are registered with SEBI are its members.

Assets under Management (AUM) as on May 31, 2019 has crossed a landmark of 25 Lakh crore and almost touched a new high of 26 Lakh crore. AUM as on 31-May-2019 stood at Rs. 25, 93,560 crore. AUM as on 30-June-2019 stood at Rs. 24, 25,040 Crore.


 

Back to All Article, Resources


Also read: Systematic Withdrawal Plan (SWP) in Mutual Fund



About Nidhi Broking Services:


Nidhi Broking Services is one of Mutual Fund Consultant in Thane. We offer services like NRI Investments, Equity Trading, IPO, Debentures, Mutual Funds, etc.

Talk to us On 022 - 2530 3690 / 022 - 2530 1134 Or Whatsapp us on +91 70391 78941 Or Email us at info@nidhibroking.com

Happy to help!



Share This: