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History of Indian Mutual Fund Industry

With the emergence of diverse productive techniques regarding investing, mutual funds have
become one of the most popular investment decision options. A mutual finance is a simple
investment decision product structured around the concept of risk mitigation by spreading
purchases in multiple channels. According to Nielsen global survey of investment attitudes, mutual
funds is one of the favourite investment decision options that ranked atop among the other assets
like precious metals, stocks and bonds.
In this article, we will glance at the history of the mutual fund industry which grew fairly
successfully and helped large number of investors generate wealth over the years.
Entry of mutual funds in India (1963)
The concept of mutual funds emerged in India in 1963 by the formation of Unit Trust of India (UTI)
which is a watermark in annals of mutual fund industry in India. Mutual funds were initiated by
government and the Hold Bank of India (RBI), with an aim to draw in small investors and were
focused mainly on investing regarding creating wealth in the long run.
Monopoly era by UTI (1964-1987)
Established via an Act of parliament in 1963, the Unit Trust of India (UTI) enjoyed monopoly status
regarding 23 years and functioned under the legislation of RBI to get a period of 15 years. Later, it
was de-linked from RBI in 1978 and functioned under the legislation of Industrial Development Bank
of India (IDBI) which took over the administrative control in place of RBI. The first unit scheme of
UTI was launched in 1964 and later more innovative strategies were launched in 1970' s and 1980' s
to attract and suit the demands of Indian retail investors. By the end of 1987, the Assets Under
Management (AUM) of UTI increased by ten times to Rs 6700 crore.
Entry of Public Sector Players (1987)
Public sector mutual fund players inserted in the market in 1987. SBI mutual account was the first
non-UTI mutual fund in India. It has been successfully managing large investor's funds since 1988. It
launched many schemes to provide investors with opportunities regarding making profits within a
diversified basket of stocks of Indian companies. Check more information about check lic policy
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Later, such strategies were launched by Canbank mutual fund in (1987), Life Insurance Corporation
(LIC) in (1989), Punjab Mutual Fund (Punjab National Bank ) in (1989), Standard bank of India in
(1990), General Insurance Corporation (GIC) in (1990). By the close of 1993, the AUM of mutual
fund industry had increased seven times and had Rs 47, 004 crore of assets under management.
However, the UTI retained its position as the dominant player with 80% market share.
Entry of Private Sector Players (1993)
To provide a wider choice of funds to Native indian investors, private sector players along with
foreign mutual fund companies were permitted to enter into the mutual fund industry in 1993. In the

same yr, the first mutual fund regulations was distributed, saying all mutual fund companies except
UTI need to be registered and governed. In 1993, the erstwhile Kothari Pioneer ( now merged with
Franklin Templeton) was the first private sector mutual fund business in India. During 1994-95, 11
private sector funds have launched their schemes introducing innovative investment decision
strategies.
SEBI - Mutual Funds Legislation (1996)
The mutual fund industry witnessed a sea change in the 1990s. In 1993, the mutual fund industry
started functioning under the legislation of Securities and Exchange Board of India (SEBI). This is,
probably, the most elaborate regulatory effort in the history of mutual fund industry of India.
Consequently, there was a spurt in the number of mutual fund houses with many foreign players
setting up funds in India. By the end of 2003, right now there were 33 mutual fund companies with
total AUM of Rs 1, 21, 805 crore. The largest mutual fund UTI had Rs 44, 541 crore of AUM in the
same yr.
In 2003, UTI was disaggregated into two entities. A single is the Unit Trust of India with AUM of Rs
29, 835 crore (as on Jan 2003). This has been functioning under an administrator and under the
rules framed by Government of India. This does not come under the purview of the Mutual Fund
Regulations.
And the second one is UTI Mutual Fund Ltd, sponsored by State Standard bank of India, Punjab
National Bank, Bank of Baroda and LIC of India. This is registered with SEBI and functions as per
mutual fund regulations. Currently Unit Trust of India works under the name UTI mutual fund and
some of its earlier strategies were gradually wound up. However, UTI mutual finance is the largest
player in the mutual fund industry.
As Indian mutual fund industry experienced major growth, simultaneously international mutual
funds like Fidelity, Franklin Templeton Mutual Fund, etc . entered Indian market. Right now there
are 44 mutual fund players in the market until March 2012. The mutual fund industry has AUM of Rs
6. 92 lakh crore as on June 2012.