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 Below quote from Suman Bannerjee, CIO, Hedonova, a US based Hedge Fund

The Securities and Exchange Board of India (SEBI) is planning to reduce compliance requirements for passive funds that track market indices or specific market segments, such as passive index funds and exchange-traded funds (ETFs). The move is aimed at fostering the growth of passive investments in the Indian mutual fund industry. The regulator is introducing "mutual fund light" regulations to provide greater flexibility to index funds and ETFs, enabling them to offer transparency, diversification, and lower costs to investors. SEBI is also implementing prudential regulations for open-ended mutual funds, particularly debt funds, to enhance liquidity in the debt market and address risks.

These regulations include requirements for minimum liquidity buffers, restrictions on investments in a single company or sector, and self-testing to assess the impact of market movements on the Net Asset Value (NAV) of the fund. SEBI is committed to promoting good governance practices in the mutual fund industry, with strengthened trustee supervision of Asset Management Companies (AMCs) and encouragement for mutual funds to actively participate in voting and corporate governance matters. The regulator is also focused on transparency, requiring regular disclosures of portfolio details for debt funds and providing comprehensive information about mutual fund portfolios on fund websites.

Overall, these measures aim to support the growth of passive investments, enhance investor protection, and promote good governance in the Indian mutual fund industry.

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