Are you someone who needs to learn about mutual funds in India? People have become very familiar with the term mutual funds, and the word investment is common. Occasionally, mutual funds can be a game-changer and sometimes a game-ender. The mutual fund industry is growing rapidly in India as well as abroad. Investing has become common among young generations.
Mutual funds are managed by professionals who are experts in that field. The manager is responsible for conducting research and analyzing investments.
What makes people addicted to mutual funds? The reason is that Inflation-adjusted money returns are what they earn. As everyone knows, mutual funds carry a certain amount of risk. So before investing, make sure that you do proper research. Let’s examine how mutual funds have evolved in India and their history.
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History of mutual funds in India
Mutual funds started to grow in India in 1963. The Unit Trust of India (UTI) was the first company established in India. It is a joint action between the Reserve Bank of India (RBI) and the Government of India.
Upon delinking from the RBI in 1978, the Industrial Development Bank of India (IDBI) became UTI’s regulatory and administrative authority. The Unit Scheme 1964 (US ’64) was UTI’s initial program, and UTI had $6,700 crores in assets under management by the end of 1988.
The history of mutual funds can be divided into five categories as follows:
Phase 1 (1964 – 1987)
Unit Trust of India (UTI) was formed by the Parliament Act of 1963, thus establishing the mutual fund industry. It works under the supervision and administrative control of the Reserve Bank of India. The Indian Industrial Development Bank (IDBI) replaced the Reserve Bank of India as the administration and regulatory authority after some time. Assets Under Management (AUM) at UTI had reached Rs.6700 crores by 1988.
Phase 2 (1987- 1993)
Public sector banks appeared during the second phase of mutual fund history. Public sector banks, Life Insurance Corporation of India (LIC), and Insurance Corporation of India established public sector mutual funds in 1987.
(GIC). The first non-UTI MF was SBI Mutual Fund, which debuted in June 1987. In December 1987, Canara Bank was founded as Canara Bank Mutual Fund. Similar to this, several banks created mutual funds, including:
- In August 1989, Punjab National Bank Mutual Fund
- Nov. 1989, Indian Bank Mutual Fund
- In June 1990, the Bank of India Mutual Fund
- In October 1992, Baroda Mutual Fund
- In June 1989, LIC Mutual Fund
- In December 1990, GIC Mutual Fund
- By 1993’s end, the total asset
Phase 3 (1993 – 2003)
With the advent of private sector funds in 1993, a new era for the mutual fund business was inaugurated. Investors now have access to a variety of funds.
SEBI Mutual Fund regulations existed for all mutual funds except UTI in 1993. It was later, in 1996, that the SEBI regulations were replaced with more comprehensive ones.
The number of mutual funds has grown over time, and several international sponsors have established mutual funds in India. During this time, there were also a lot of mergers and acquisitions in the MF sector. By the end of January 2003, there were 33 mutual funds with total assets of Rs.1,21,805 crores, out of which UTI alone had an AUM of £44,541 crores.
Phase 4 ( February 2003 – April 2014)
UTI was split into two separate organizations in February 2003 due to the repeal of the Unit Trust of India Act of 1963.
The first is the Specified Undertaking of Unit Trust of India (SUUTI), which runs following guidelines established by the Indian government and an administrator. The Mutual Fund Regulations do not apply to it.
The second is the Unit Trust of India-created UTI Mutual Fund, which began operating on February 1, 2003, and is governed by SEBI MF regulations.
- After the global economic recession in 2009, the global financial markets were at an all-time low, and so was India.
- Most investors who put their money when markets were at their peak suffered huge losses.
- The Indian mutual fund industry struggled to recover from these hardships and remodel itself for over two years.
- Also, the situation worsened with SEBI abolishing the entry load and the repercussions of the global economic crisis.
- This scenario is evident from the sluggish growth in the overall AUM of the Indian mutual fund industry.
Facts about Mutual Funds
Since May 2014, the Indian MF industry has experienced a steady inflow and rise in AUM and the total number of investor accounts (folios).
From June 2012 to June 2022, the MF industry has grown from Rs.6.89 lakh crores to Rs.35.54 lakh crores.
The number of investor folios has gone up from 5.82 crores to 13.47 crores from June 2017 to June 2022.
The MF distributors also have played a significant role in popularising the SIP plans.
The growth in the MF industry has been possible because of the twin effects of regulatory measures taken by SEBI to re-energize the sector in September 2012.
Mutual Fund’s Future
This industry can grow further if Indians save more towards mutual funds.
Moreover, observers say that many Indians have started shifting a part of their savings from physical assets (gold, land) to financial instruments like equities, bonds, ETFs, etc.
SEBI has come up with various initiatives for investor awareness and trying to expand its reach beyond top cities.
With increasing income, population urbanization, digitalization and better connectivity mutual fund industry has a bright future.
Also, the MF industry can grow multi-fold with more encouragement from AMFI and the government.
Conclusion
The history of mutual funds in India has been interesting. Over the years, the industry has grown and matured. With the right strategies, investors can make the most of their mutual fund investments. The industry is expected to provide opportunities to achieve financial goals.
