Page 50 - Banking Finance July 2025

ARTICLE

cost-effective for retail participants. Regu-
latory refinements continued, with stan-
dardized disclosures, limits on expense
ratios (TERs), and the removal of entry
loads improving investor protection and
reducing costs. Focused investor educa-
tion initiatives and simplified Know Your
Customer (KYC) procedures also played a
vital role in increasing awareness and par-
ticipation. These initiatives resulted in the
industry's Assets Under Management
(AUM) crossing the Rs. 10 lakh crore mark
by the end of 2014.

Phase 2: Accelerating Growth and
Source: AMFI
Access (2015 - March 2025)
Phase 1: The Foundation Period (1964 - 2014) The period from 2015 onwards marked an era of acceler-
The inception dates back to 1963 with the government- ated expansion and democratization. Industry AUM experi-
backed Unit Trust of India (UTI), which launched the first enced nearly six-fold growth, reaching over Rs. 53.40 lakh
mutual fund product (US-64) in 1964. For over two decades crore by March 2024, before climbing further to Rs. 65.74
(1964-1987), UTI remained the sole player in a market char- lakh crore by March 2025. India's share of the global mu-
acterized by limited product choice, conservative investor tual fund market has also witnessed a substantial increase.
attitudes, and a focus primarily on urban savers. In an The emphasis during this phase was on removing the barri-
economy dominated by agriculture and bank deposits, mu- ers that hindered wider acceptance:
tual funds offered a novel way to channel household sav- Overcoming Hurdles:
ings into capital markets, especially crucial in an environ- o For Cautious Investors: Addressing concerns
ment where inflation often outpaced deposit returns. about market volatility and building trust, while
demonstrating value compared to guaranteed re-
From 1987 to 1995, the sector saw the entry of public sec- turn products like PPF. Managing the impact of
tor financial institutions, introducing an element of compe- expense ratios was also key.
tition. The sweeping economic reforms of the early 1990s o For Aware but Hesitant Investors: Improving the
provided further impetus. Key regulatory developments
reach and accessibility of distribution networks,
during this time included granting statutory powers to the
particularly beyond major cities, to provide neces-
Securities and Exchange Board of India (SEBI) in 1992 and
sary guidance and build confidence for self-directed
establishing the Association of Mutual Funds in India (AMFI) investing.
in 1995. These bodies were instrumental in setting standards
for transparency and ethical conduct. By 1995, the industry's o For New Investors: Tackling low financial literacy,
AUM had grown substantially to Rs. 47,000 crore. especially in smaller towns, countering the strong
preference for traditional assets, and simplifying the
A major turning point occurred around the year 2000 with understanding of mutual fund products.
the entry of private sector AMCs (Phase 1C: 1995-2014). Catalytic Interventions:
This influx sparked innovation, leading to specialized offer- o Products & Strategies: SIPs became a cornerstone,
ings like sector-specific funds, tax-saving Equity Linked Sav- mitigating volatility concerns and promoting disci-
ings Schemes (ELSS), and Fixed Maturity Plans (FMPs). The plined, affordable investing. Direct plans and pas-
introduction and popularization of Systematic Investment sive instruments (Index Funds, ETFs) offered lower-
Plans (SIPs), Exchange Traded Funds (ETFs), and Fund of cost alternatives.
Funds (FoFs) made investing more disciplined, diversified, and
o Technological Integration: Digital platforms trans-

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