SEBI has permitted PE firms to establish self-sponsored asset management companies. Credit: CUsai from Pixabay.

The Securities and Exchange Board of India (SEBI) has amended the country’s mutual fund industry rules to allow private equity (PE) firms to sponsor mutual fund schemes.

The market regulator has also permitted PE firms to establish self-sponsored asset management companies (AMCs).

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As per the new rule, a private equity firm or its manager is required to have a minimum of five years of experience in funds management and investment in the financial industry to set up a mutual fund company, reported Reuters.

The applicant should also have the experience in handling committed and drawn-down capital of at least INR50bn ($608m) on the date of filing an application.

The current Indian law allows only financial services companies and corporates to establish AMCs.

The amendments were based on a consultation paper released by SEBI earlier this year, reported Moneycontrol. The paper reviewed the role of mutual fund sponsor.

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Addressing the media, SEBI chairperson Madhabi Puri Buch said: “We would like more innovation in the MF industry.”

Buch added: “Self-sponsored AMC will also be now allowed…Once their kids become mature, sponsors can exit without having to find a new parents for this grown-up child.”

In addition, SEBI unveiled a new time schedule for disclosure of net asset value (NAV) of mutual fund schemes that invest abroad.

The move, which was taken considering differences in time zones and market hours, requires mutual funds to reveal the NAVs of all schemes within a specific outer time limit.

The new schedule will take effect from 1 July this year.