SEBI allows MFs to launch passive ELSS, debt-based ETF schemes; Zee Business decodes what it means for investors

The Securities and Exchanges Board of India (SEBI) has allowed Mutual Funds (MFs) to launch passive ELSS schemes as well as debt-based ETFs and index funds. The market regulator has issued a circular on this. Zee Business Associate Editor Brajesh Kumar explains what it means for investors.

ELSS is Equity Linked Saving Schemes and ETFs are Exchange Traded Funds. 

According to Kumar, the investors would get tax saving options through passive ELSS with approved Mutual Fund schemes. In order to apply for these schemes, one must know the criteria. 

The MFs must have an ELSS scheme either on an active or passive basis and ELSS should be only based on an index of the top 250 market cap companies, the SEBI circular read. 

ETFs on debt-based and index funds could be of Corporate Debt, Government Security, Treasury Bills, SDLs, and others, Kumar said quoting the circular. 

Besides, the exposure limit to debt index/ETF will also be fixed and the maximum exposure in any one group being limited to 25 per cent, he added. 

He further said that at least 2 market makers are required to maintain liquidity and their incentive will be within the TER (Total Expense Ratio) of the scheme. 

Kumar quoting the SEBI’s circular said, the size of NFO (new fund offerings) has been reduced from Rs 10 to 5 crore and only deals above Rs 25 crore will be done directly from the MF company. 

Highlighting benefits of the passive schemes, Kumar said that the biggest benefits are that they possess transparency, diversification, and are also low-cost. 

Zee Business Managing Editor Anil Singhvi called this is a big development from the market regulator opining that the move will benefit the MF houses.  

Source by www.zeebiz.com