PHASE OF MUTUAL FUND IN INDIA

abhishreshthaa · Sep 3, 2010

MUTUAL FUNDS

A Mutual Fund is trust that pools the savings of a number of investors who share a common financial goal .
The money thus collected is then invested in capital market instrument such as shares , debentures and other securities .
The income earned through these investments and the capital appreciation realized are shared buy its unit holders in proportion to the number of unit owned by them.
Thus a Mutual Fund is the most suitable investment for the common man as it offers an opportunity to invest in a diversified , professionally managed basket of securities at a relatively low cost.

The history of mutual funds in India can be broadly divided into four distinct phases .

First Phase-1964-87

Unit Trust of India (UTI) was established on 1963 by an Act of Parliament .
It was set up by 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 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 )

The year 1987 marked the entry of non – UTI , public sector mutual funds set up by public sector banks a 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 Cenrabank 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 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 and then the mutual funds industry flourished further.

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

With the entry of private sector funds in 1993, a new era started in Indian mutual fund industry, giving he 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 he 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 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 of assets under management was way ahead of other mutual funds

Fourth Phase – since February 2003

I

n 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 Ltd, 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.