| History of the Indian Mutual Fund Industry |
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| The mutual fund industry in India started
in 1963 with the formation of Unit Trust of India, at the initiative of the Government of
India and Reserve Bank of India. The history of mutual funds in India can be broadly divided
into four distinct phases |
| First Phase – 1964-87 |
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| Unit Trust of India (UTI) was established on 1963 by an
Act of Parliament. It was set up by the Reserve Bank of India and functioned under the
Regulatory and administrative control of 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 and 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. |
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| Second Phase – 1987-1993 (Entry of Public
Sector Funds) |
|
| 1987 marked the entry of non- UTI, public
sector mutual funds set up by public sector banks and 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 Canbank 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 mutual 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. |
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| Third Phase – 1993-2003 (Entry of Private
Sector Funds) |
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| With the entry of private sector funds in 1993, a new
era started in the Indian mutual fund industry, giving the 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 the first private
sector mutual fund registered in July 1993. |
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| 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. |
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| The number of mutual fund houses went on increasing,
with many 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 under management was way ahead of other mutual funds. |
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| Fourth Phase – since February 2003 |
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| In 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. |
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| The second is the UTI Mutual Fund, 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, the mutual fund industry has entered its current phase of
consolidation and growth. |
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| The graph indicates the growth of assets over the
years. |
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Note:
Erstwhile UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the
Unit Trust of India effective from February 2003. The Assets under management of the
Specified Undertaking of the Unit Trust of India has therefore been excluded from the
total assets of the industry as a whole from February 2003 onwards. |
