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The mutual fund industry in India started in 1963 with the formation of Unit Trust
of India, at the initiative of the Government of India and Reserve Bank the. The
history of mutual funds in India can be broadly divided into four distinct phases
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First Phase – 1964-87
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Unit Trust of India (UTI) was established on 1963 by an Act of Parliament. It was
set up by the Reserve Bank of India and functioned under the Regulatory and administrative
control of the Reserve Bank of India. In 1978 UTI was de-linked from the RBI and
the Industrial Development Bank of India (IDBI) took over the regulatory and administrative
control in place of RBI. The first scheme launched by UTI was Unit Scheme 1964.
At the end of 1988 UTI had Rs.6,700 crores of assets under management.
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Second Phase – 1987-93(Entry of Public Sector Funds)
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1987 marked the entry of non- UTI, public sector mutual funds set up by public sector
banks and Life Insurance Corporation of India (LIC) and General Insurance Corporation
of India (GIC). SBI Mutual Fund was the first non- UTI Mutual Fund established in
June 1987 followed by Canbank Mutual Fund (Dec 87), Punjab National Bank Mutual
Fund (Aug 89), Indian Bank Mutual Fund (Nov 89), Bank of India (Jun 90), Bank of
Baroda Mutual Fund (Oct 92). LIC established its mutual fund in June 1989 while
GIC had set up its mutual fund in December 1990. At the end of 1993, the mutual
fund industry had assets under management of Rs.47,004 crores.
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Third Phase – 1993-2003(Entry of Private Sector Funds)
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With the entry of private sector funds in 1993, a new era started in the Indian
mutual fund industry, giving the Indian investors a wider choice of fund families.
Also, 1993 was the year in which the first Mutual Fund Regulations came into being,
under which all mutual funds, except UTI were to be registered and governed. The
erstwhile Kothari Pioneer (now merged with Franklin Templeton) was the first private
sector mutual fund registered in July 1993. The 1993 SEBI (Mutual Fund) Regulations
were substituted by a more comprehensive and revised Mutual Fund Regulations in
1996. The industry now functions under the SEBI (Mutual Fund) Regulations 1996.
The number of mutual fund houses went on increasing, with many foreign mutual funds
setting up funds in India and also the industry has witnessed several mergers and
acquisitions. As at the end of January 2003, there were 33 mutual funds with total
assets of Rs. 1,21,805 crores. The Unit Trust of India with Rs.44,541 crores of
assets under management was way ahead of other mutual funds.
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Fourth Phase – since February 2003
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In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the 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. The second is the UTI
Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is registered with SEBI
and functions under the Mutual Fund Regulations. With the bifurcation of the erstwhile
UTI which had in March 2000 more than Rs.76,000 crores of assets under management
and with the setting up of a UTI Mutual Fund, conforming to the SEBI Mutual Fund
Regulations, and with recent mergers taking place among different private sector
funds, the mutual fund industry has entered its current phase of consolidation and
growth. As at the end of March 2009, there were 35 mutual funds, which managed assets
of Rs. 4,17,300crores under 1,001 schemes
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This fast growing industry is regulated by the Securities and Exchange Board of
India (SEBI).
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In February 2003, following the repeal of the Unit Trust of India Act 1963 UTI was
bifurcated into two separate entities. One is the 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.
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The second is the UTI Mutual Fund Ltd, sponsored by SBI, PNB, BOB and LIC. It is
registered with SEBI and functions under the Mutual Fund Regulations. With the bifurcation
of the erstwhile UTI which had in March 2000 more than Rs.76,000 crores of assets
under management and with the setting up of a UTI Mutual Fund, conforming to the
SEBI Mutual Fund Regulations, and with recent mergers taking place among different
private sector funds, the mutual fund industry has entered its current phase of
consolidation and growth. As at the end of March 2009, there were 35 mutual funds,
which managed assets of Rs. 4,17,300crores under 1,001 schemes
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