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History of Mutual Fund in India

Mutual fund was born in year 1774 but it took long time to reach India. In India mutual fund journey started in year 1963 with formation of Unit Trust of India (UTI). It was not private institution initiative but the initiative was from Government and Reserve Bank of India (RBI). Until 1987, UTI had monopoly but year 1987 marked the entry of non-UTI fund. The history of mutual fund in India can be divided into different phases.

Phase 1 – 1964-1987

This is the period when UTI was the only mutual fund in India. UTI was established in 1963 by an Act of Parliament. Though setup of UTI was initiative from government and RBI, in 1978 UTI was delinked from RBI. After de linking of RBI from UTI, Industrial and Development Bank of India (IDBI) took over the regulatory and administrative control.

Establishment of UTI has been a landmark in history of mutual fund. The main objective of the UTI was to offer both small as well as large investors the means to participate in the growth of the Country. The first scheme launched by UTI was Unit Scheme 1964 (US 64). At the end of year 1988, UTI had Rs. 6,700 crores of assets under management.

Phase 2 – 1987-1993

Second phase marked the entry of the public sector mutual fund. SBI mutual fund was the first non-UTI mutual fund set up in June 1987. Then after other public sector banks established their mutual fund. LIC established its mutual fund in June 1989 while General Insurance Corporation of India (GIC) had setup its mutual fund in December 1990.

Before the entry of the public sector mutual fund, UTI had Rs. 6,700 crores of assets under management but before the entry of private sector mutual fund in year 1993, it has grown to Rs. 47,004 crores which is around 7 times more.

Phase 3 – 1993-2003

Entry of private sector mutual fund has begun the new era for the Indian mutual fund industry. Entry of private sector mutual fund gave wider choices to investors. Now investor had option to buy mutual funds from UTI, public sector mutual funds and private sector mutual funds. Kothari Pioneer (merged with Franklin Templeton) was the first private sector mutual fund registered in July 1993. Year 1993 also marked the entry of mutual fund regulation. The 1993 SEBI (Mutual Fund) regulations. Later on it was substituted by SEBI (Mutual Fund) regulations 1996. At the end of January 2003, there were 33 mutual funds with total assets under management of Rs. 1,21,805 crores. The UTI with Rs. 44,541 crores of assets under management was way ahead of other mutual funds.

Phase 4 – Since February 2003

In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was bifurcated into UTI Mutual Fund and the Specified Undertaking of the Unit Trust of India. 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.

UTI Mutual Fund, sponsored by SBI, PNB, BOB and LIC was registered with SEBI and functions under the Mutual Fund Regulations.

Mutual Fund data in April 2020

Assets Under Management (AUM) of Indian Mutual Fund Industry as on April 30, 2020 stood at Rs. 23,93,486 crore. The AUM of the Indian MF Industry has grown from Rs. 8.09 trillion as on 30th April, 2010 to Rs. 23.93 trillion as on 30th April, 2020 about 3 fold increase in a span of 10 years. The total number of accounts (or folios as per mutual fund parlance) as on April 30, 2020 crossed a landmark of 9 crore.

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