Mutual Funds, India style have become extremely popular and are now seeing a growth curve similar to the growth previously experienced in the United States and other parts of the world. Since the formation of the Unit Trust of India in 1963, there have been four phases in the “Mutual Funds India” phenomenon.
Phase One of Mutual Funds India
From 1963, when an act of Parliament established the Unit Trust of India (UTI), the administrative control of the mutual fund industry rested with the Reserve Bank of India. This continued until 1978, when the regulation of the UTI was taken over by the Industrial Development Bank of India.
Phase Two of Mutual Funds India
In 1987, the second phase of “Mutual Funds India” began when the first non-Unit Trust of India mutual funds came upon the scene. Public sector banks and two Indian life insurance companies set up public sector mutual funds for the first time. General Insurance Corporation of India and Life Insurance Corporation of India along with CanBank, Punjab National Bank, Indian Bank, Bank of India, and Bank of Baroda all started their own public sector mutual funds.
Phase Three of Mutual Funds India
By 1993, private sector began their influence on “Mutual Funds India” and provided a wider choice of investments and fund families from which to choose. It was also in 1993 that the very first mutual fund regulations were instituted in India. Now all mutual funds must be registered under these regulations except the original Unit Trust of India.
These regulations were revised in 1996 and made more comprehensive. The 1996 version replaced the 1993 version, and all mutual funds now operate under the 1996 Mutual Fund Regulations.
Foreign mutual fund houses began setting up funds in India while other mutual fund houses went through mergers or acquisitions. By the end of the first month of 2003, there were thirty-three different mutual funds available, with the original Unit Trust of India still leading the way in terms of assets under management.
Phase Four of Mutual Funds India
By February of 2003, after the Unit Trust of India Act of 1963 was repealed, the original Unit Trust of India was split into two different parts. One part is called the “Specified Undertaking of Unit Trust of India” and the other is the “UTI Mutual Fund”. The first does not come under the Mutual Fund Regulations, but operates under an administrator and rules framed by the Governments. The second part is registered with SEBI and functions under the 1996 Mutual Fund Regulations.
This phenomenon continues to experience considerable growth along with consolidation. Will it see growth like the Mutual Fund Industry in the United States? Only time will tell if the Mutual Funds India phenomenon will keep going and going and going…