SEBI's Scheme Categorisation Framework — The Full Category Structure Explained
Before October 2017, Indian mutual fund houses could launch schemes with near-identical mandates but different names, making it genuinely difficult for investors to compare products or even understand what they were buying. SEBI's Categorisation and Rationalisation of Mutual Fund Schemes circular changed that by mandating a standardised, well-defined universe of scheme categories that every AMC must operate within. This framework remains the backbone of how mutual fund products are structured and disclosed in India today.
Why Categorisation Was Necessary
SEBI's stated objective was straightforward: bring uniformity in the characteristics of similar schemes launched by different mutual funds, so that comparison becomes meaningful and product proliferation with cosmetic differences is curbed. AMCs were required to rationalise their existing schemes to fit into the defined categories and were restricted to having only one scheme per category, with limited exceptions such as index funds/ETFs tracking different indices, fund-of-funds with different underlying schemes, and sectoral or thematic funds investing in different sectors or themes.
The Five Broad Groups
Every open-ended scheme must fall into one of the following broad groups, each with its own set of sub-categories:
1. Equity Schemes Defined by market-capitalisation mandates and investment style. Sub-categories include Multi Cap Fund, Large Cap Fund, Large & Mid Cap Fund, Mid Cap Fund, Small Cap Fund, Dividend Yield Fund, Value Fund, Contra Fund, Focused Fund, Sectoral/Thematic Fund, ELSS (tax-saving fund), and Flexi Cap Fund. Each carries a defined minimum investment requirement in the relevant market-cap segment — for instance, a Large Cap Fund must invest a minimum proportion of its corpus in large-cap stocks, while a Multi Cap or Flexi Cap fund is free to allocate more flexibly across market capitalisations.
2. Debt Schemes The most granular of the five groups, structured primarily around portfolio maturity and duration, covering categories such as Overnight Fund, Liquid Fund, Ultra Short Duration Fund, Low Duration Fund, Money Market Fund, Short Duration Fund, Medium Duration Fund, Medium to Long Duration Fund, Long Duration Fund, Dynamic Bond Fund, Corporate Bond Fund, Credit Risk Fund, Banking and PSU Fund, Gilt Fund, Gilt Fund with 10-year constant duration, and Floater Fund. Each category has a defined Macaulay Duration band (for the duration-based categories) or a specific investment universe (for categories like Gilt Fund, which must invest only in government securities).
3. Hybrid Schemes Schemes that invest across asset classes in defined proportions, including Conservative Hybrid Fund, Balanced Hybrid Fund, Aggressive Hybrid Fund, Dynamic Asset Allocation Fund, Multi Asset Allocation Fund, Arbitrage Fund, and Equity Savings Fund. Each sub-category has a prescribed minimum and maximum allocation band to equity, debt, and other asset classes.
4. Solution-Oriented Schemes Designed around specific investor goals rather than asset allocation style, covering Retirement Fund and Children's Fund, both of which carry a mandatory five-year lock-in or lock-in till the child attains majority, whichever is earlier.
5. Other Schemes A residual group covering Index Funds/ETFs, Fund of Funds (domestic and overseas), Gold ETFs, Silver ETFs, and other passively managed products that don't fit the active-management categories above.
Taken together with their sub-categories, this structure yields well over thirty distinct scheme types across the five groups — commonly referred to informally as the "36-category" universe, though the exact count evolves slightly as SEBI periodically updates the framework (for instance, adding Silver ETFs and Flexi Cap Fund as standalone categories after the original 2017 circular).
The One-Scheme-Per-Category Rule
A defining feature of the framework is that an AMC can generally launch only one scheme in a given category. Where an AMC wants product variety within what looks like the same space, it must justify the differentiation clearly — for example, two sectoral funds are permitted only if they track genuinely different sectors, and two index funds are permitted only if they track different underlying indices.
Fundamental Attributes and Investor Protection
Because categorisation locks a scheme into a specific mandate — market-cap band, duration band, or asset-allocation range — any move by an AMC to alter these parameters is treated as a change in the scheme's fundamental attributes. Such a change cannot be made unilaterally; it requires written communication to every unit holder along with an exit option at prevailing NAV without exit load, so investors who no longer want exposure matching the revised mandate can leave the scheme without cost.
Why This Framework Still Matters
For advisors, compliance professionals, and investors alike, the categorisation framework is what makes a "Large Cap Fund" from one AMC genuinely comparable to a "Large Cap Fund" from another — the underlying mandate, market-cap exposure, and structural constraints are standardised by regulation rather than left to marketing language. It has also made scheme rationalisation, merger, and consolidation exercises far more structured, since any merger of schemes must still result in a fund that fits cleanly within one of SEBI's defined categories.