MF Lite

What is the MF Lite Framework

The Securities and Exchange Board of India (SEBI) has introduced the Mutual Funds Lite (MF Lite) framework as a significant step towards simplifying the regulatory landscape for passive mutual funds in India.

The framework is designed to promote ease of entry, encourage new players, reduce compliance requirements, increase penetration, facilitate investment diversification, increase market liquidity and foster innovation within the passive investment sector.

The MF Lite framework follows a “light-touch” regulatory approach, recognising the rule-based nature of passive investing. It aims to:

Lower entry barriers for fund houses

Simplify compliance and regulatory processes

Enable faster product innovation

Promote wider adoption of passive investment strategies 

This framework became effective from March 16, 2025, marking a step towards making passive investing more accessible, transparent, and cost-efficient for investors.

What are passive funds?

Understanding MF Lite will get easier once we know how passive funds works and how are they different from active funds. Passive funds are such schemes that aim to replicate the performance of a market index, passive funds seek to match the performance of their underlying index.

What is an MF Lite Scheme?

An MF Lite scheme refers to a passively managed mutual fund scheme such as an index fund, ETF, or eligible fund of funds that:

Track benchmarks indices as follows:

     1. Domestic equity indices

     2. Domestic debt indices and

     3. Equity overseas indices

Operates with minimal fund manager discretion

Is governed under the MF Lite regulatory framework 

In this regard, SEBI has stipulated that AMFI shall, in consultation with SEBI, prescribe the list of indices under the following categories which will be updated on a periodic basis:

(i) Domestic equity indices Read more

(ii) Domestic debt indices Read more

(iii) Equity overseas indices (the list of overseas equity passive indices, whose quantitative threshold / AUM exceeds a minimum threshold of $ 20 billion, which qualified to be covered under the Phase 1 of implementation of Passive Funds of MF Lite) Read more 

(iv) List of hybrid passive indices (currently only Nifty 1D Rate Index meets the aforesaid criterion)

Note: The lists of above indices are shared for information and education purpose only. It may be noted the said lists will be updated by SEBI/AMFI, on a periodic basis.

Which schemes are covered under the MF Lite Framework?

In its initial phase, the MF Lite framework applies to following passive funds:

Equity Index Funds and ETFs tracking permitted indices

Debt Index Funds and ETFs investing in G-Secs, T-bills, and SDLs

Gold and Silver ETFs, and FoFs investing in them

Overseas ETFs and FoFs based on a single underlying index

Fund of Funds investing in a single domestic or international index 

Notably, FoFs investing in multiple indices are not included in Phase 1. 

Note: The above list is shared for information and education purpose only. It may be noted the said list will be updated by SEBI/AMFI, on a periodic basis.

Objectives of the MF Lite Framework

The introduction of MF Lite is aligned with SEBI’s broader goals of strengthening the passive investment ecosystem:

Lower compliance requirements - Streamlined processes for documentation, disclosures, and approvals

Encouraging new participants and increasing market penetration of passive funds in the mutual fund industry

Reducing regulatory and operational burden

Enhancing diversification opportunities for investors

Supporting innovation in passive investment products 

Overall, the framework seeks to create a more accessible and competitive environment for passive investing.


What changes for Investors?

The MF Lite framework is expected to improve the overall passive investing experience through:

Greater simplicity in understanding and accessing passive products

Improved transparency in tracking fund performance

Potential cost efficiencies due to lower operational overheads

Wider choice of passive investment options 

As passive investing continues to gain traction globally, MF Lite represents an important step towards aligning India’s regulatory approach with the evolving needs of investors.

The above information is for general purposes only and not an investment advice. Readers should seek professional advice before taking any investment related decisions.