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India’s mutual fund trade started with the creation of the Unit Trust of India
History of mutual funds in India
A sturdy monetary market with broad participation is essential for the expansion of any financial system. India’s journey towards constructing such a market started with the introduction of mutual funds, aiming to encourage saving and funding amongst its residents. Over the years, the mutual fund trade has skilled outstanding progress, evolving via numerous phases which have formed the monetary panorama of the nation.
However, readers should observe that mutual fund investments are topic to market dangers. They don’t supply assured returns. The worth of investments could fluctuate, and traders could not get well the complete quantity invested.
Here’s a short historical past of mutual funds in India, in accordance with the data obtainable on the official web site of the Association of Mutual Funds in India.
India launched its first mutual fund in 1963—the Unit Trust of India (UTI). Initiated by the Government of India and the Reserve Bank of India, UTI aimed to advertise financial savings, funding, and public participation within the earnings and earnings generated from managing securities.
In latest years, the mutual fund trade has seen outstanding progress. The evolution of mutual funds in India could be broadly categorised into 5 distinct phases;
Phase 1: 1964-1987 – The Foundation of the Mutual Fund Industry
India’s mutual fund trade started in 1963 with the creation of the Unit Trust of India (UTI) by an Act of Parliament. UTI operated underneath the regulatory oversight of the Reserve Bank of India (RBI). In 1978, UTI was separated from RBI management, and the Industrial Development Bank of India (IDBI) assumed regulatory and administrative tasks. The first scheme launched by UTI was the Unit Scheme 1964 (US ’64). By the top of 1988, UTI had property underneath administration (AUM) totaling ₹6,700 crores.
Phase 2: 1987-1993 – Entry of Public Sector Mutual Funds
In 1987, public sector mutual funds started to emerge, with entities like public sector banks, Life Insurance Corporation of India (LIC), and General Insurance Corporation of India (GIC) getting into the market. SBI Mutual Fund was the primary mutual fund exterior UTI, established in June 1987, adopted by Canbank Mutual Fund (December 1987), Punjab National Bank Mutual Fund (August 1989), and others. LIC launched its mutual fund in June 1989, and GIC in December 1990. By the top of 1993, the mutual fund trade’s AUM had grown to ₹47,004 crores.
Phase 3: 1993-2003 – Entry of Private Sector Mutual Funds
The formation of SEBI in 1992 marked a big milestone for the Indian securities market, offering regulation and safety for traders. In 1993, SEBI launched its first set of mutual fund rules, permitting private-sector mutual funds to enter the market. Kothari Pioneer, which later merged with Franklin Templeton, was the primary private-sector mutual fund, registered in July 1993. This opened the door to extra numerous mutual fund choices for Indian traders. By January 2003, the trade had 33 mutual funds managing AUM of ₹1,21,805 crores, with UTI alone managing ₹44,541 crores.
Phase 4: 2003-2014 – Industry Consolidation and Challenges
In February 2003, the Unit Trust of India Act was repealed, and UTI was break up into two entities: the Specified Undertaking of the Unit Trust of India (SUUTI) and UTI Mutual Fund, which got here underneath SEBI rules. This section noticed vital consolidation throughout the trade, as a number of private-sector funds merged. The world monetary disaster of 2008-09 negatively impacted the trade, resulting in investor losses and decreased confidence. SEBI’s abolition of the entry load in 2009 additional strained the trade, which noticed sluggish progress in AUM from 2010 to 2013.
Phase 5: 2014 Onwards – Renewed Growth and Expansion
From May 2014, the mutual fund trade entered a section of speedy progress, supported by regulatory measures from SEBI geared toward increasing the trade’s attain, notably in tier II and tier III cities. This interval additionally noticed vital will increase in each AUM and investor folios. In May 2014, the trade’s AUM crossed ₹10 trillion, and by August 2017, it had doubled to ₹20 trillion. By November 2020, the AUM exceeded ₹30 trillion.
As of August 31, 2024, the Indian mutual fund trade’s AUM had soared to ₹66.70 trillion, a greater than six-fold enhance in a decade. Investor folios grew from 8.53 crore in August 2019 to twenty.45 crore in August 2024, with a mean of 19.87 lakh new folios being added month-to-month over the previous 5 years. Mutual fund distributors performed a significant position in driving this progress, notably via popularising Systematic Investment Plans (SIPs), with SIP accounts growing from 1 crore in April 2016 to 9.61 crore as of August 2024.
