SEBI has introduced new and stricter rules for mutual fund index providers in India. The aim is to improve transparency, accountability, and governance in index-based investing, which is growing rapidly in the country.
What is the New “Significant Index” Rule?
Under the new framework, any index-based mutual fund scheme with an average Assets Under Management (AUM) of more than ₹20,000 crore for six continuous months will be classified as a “Significant Index.”
Once an index enters this category, it will continue to stay there as long as its tracked AUM does not fall below the required level for three consecutive years.
SEBI will review this classification every six months, based on data ending June 30 and December 31.
Why Has SEBI Introduced These Changes?
These rules come after the implementation of the SEBI (Index Providers) Regulations, 2024.
SEBI’s main goal is to ensure that as index-based investing grows in India, the organizations managing these indices also follow strict rules and standards.
The regulator believes that better supervision will:
Improve transparency in index creation and management
Increase accountability of index providers
Protect investor interests in a fast-growing market
Which Indices Are Covered?
SEBI has already shared a list of “significant indices.” This includes major benchmark indices such as:
Sensex
Nifty 50
Nifty 500
BSE 500
The list also includes sector-based, debt, and hybrid indices.
These indices are managed by organizations like NSE Indices Limited, BSE Index Services Private Limited, and CRISIL.
What Rules Will Index Providers Have to Follow?
SEBI has made registration mandatory for all index providers offering “significant indices.” They must apply within six months.
However, indices already approved or regulated by the Reserve Bank of India (RBI) will not be affected by this rule.
Existing providers can continue their operations during the transition period but must complete the registration process within the deadline.
Separate Company Required for Index Business
SEBI has also directed that companies already registered in other categories but also running index services must create a separate legal entity for their index business within two years.
This step is aimed at:
Reducing conflicts of interest
Keeping index operations separate
Improving transparency in the system
SEBI has also clarified that grievance redressal rules will apply only to significant indices managed by registered providers.
