May 23, 2022
To
All Recognized Stock Exchanges/
All Clearing Corporations/
All Depositories/
All Custodians/
All Mutual Funds/
All Asset Management Companies (AMCs)/
All Trustee Companies/ Boards of Trustees of Mutual Funds/
All Registrar and Transfer Agents (RTAs)/
Stock Brokers cum Market Makers/
Association of Mutual Funds in India (AMFI)
Dear Sir/ Madam,
1. Considering the emergence of passive funds i.e. Exchange Traded Funds (ETFs) and Index Funds as an investment product for retail investors globally and various advantages of passive investing like transparency, diversification, lower cost vis-à-vis active funds, a need was felt to review the regulatory framework for passive funds in India. In this regard, a Working Group (WG) was constituted with representation from various stakeholders in the passive funds’ domain like AMCs, Mutual Fund Trustees,
Stock Brokers, Market Makers, Stock Exchanges, Clearing Corporations, Industry Expert, etc
2. The recommendations of the Working Group and the feedback received from the industry were deliberated in the Mutual Funds Advisory Committee (MFAC). Considering the recommendations of MFAC, the following have been decided :
I. Norms for Debt Exchange Traded Funds (Debt ETFs)/ Index Funds
Debt ETFs/ Index Funds could be based on indices comprising of (a) Corporate Debt Securities (Corporate debt indices); or
(b) Government Securities (G-sec), t-bills and/or State Development Loans (SDLs) (G-sec indices); or
(c) A combination of Corporate Debt Securities and G-sec/t-bills/SDLs (Hybrid debt indices).
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