In a circular issued on February 26, the Securities and Exchange Board of India (SEBI) said it has superseded earlier provisions on scheme categorisation contained in its October 6, 2025 and November 6, 2025 circulars.
The changes apply to all mutual funds, asset management companies (AMCs), trustee companies and the Association of Mutual Funds in India (AMFI).
Broader scheme groups retained
SEBI said mutual fund schemes will continue to be broadly classified into five groups:
- Equity Schemes – predominantly investing in equity and equity-related instruments
- Debt Schemes – predominantly investing in debt and debt-related instruments
- Hybrid Schemes – investing in a mix of asset classes such as equity, debt, InvITs and commodity-related instruments, as permitted
- Life cycle funds
- Other schemes, including Fund of Funds and passive schemes such as index funds and ETFs
The regulator clarified that the “residual portion” of a scheme refers to that part of the corpus not invested in its core asset classes as defined under the scheme characteristics.
Defined allocation bands within equity schemes
Under the revised framework, SEBI has specified minimum investment thresholds for different categories within equity schemes, along with uniform descriptions to help investors better understand product positioning.
For instance:
- Multi cap fund: Must invest at least 75% of total assets in equity and equity-related instruments. Within this, a minimum of 25% each must be allocated to large-cap, mid-cap and small-cap stocks. It is described as an open-ended equity scheme investing across large, mid and small-cap stocks.
- Large cap fund: Must invest at least 80% of total assets in equity and equity-related instruments of large-cap companies. It is described as an open-ended equity scheme predominantly investing in large-cap stocks.
- Large and mid cap fund: Must allocate a minimum of 35% each to large-cap and mid-cap stocks. It is described as an open-ended equity scheme investing in both large-cap and mid-cap stocks.
Focus on clarity and comparability
SEBI said the updated categorisation framework is aimed at accommodating the evolving mutual fund landscape and emerging opportunities across asset classes. By prescribing investment thresholds and uniform scheme descriptions, the regulator seeks to ensure consistency across fund houses and improve comparability for investors.