UNDERSTANDING MUTUAL FUND

Mutual fund is a trust that pools money from a group of investors (sharing common financial goals)
and invest the money thus collected into asset classes that match the stated investment objectives
of the scheme. Since the stated investment objectives of a mutual fund scheme generally form the
basis for an investor's decision to contribute money to the pool, a mutual fund can not deviate from
its
stated objectives
at
any point of
time.
Every Mutual Fund is managed by a fund manager, who using his investment management skills
and necessary research works ensures much better return than what an investor can manage on
his own. The capital appreciation and other incomes earned from these investments are passed on
to the investors (also known as unit holders) in proportion of the number of units they own.

When an investor subscribes for the units of a mutual fund, he becomes part owner of the assets of
the fund in the same proportion as his contribution amount put up with the corpus (the total amount
of the fund). Mutual Fund investor is also known as a mutual fund shareholder or a unit holder.
Any change in the value of the investments made into capital market instruments (such as shares,
debentures etc) is reflected in the Net Asset Value (NAV) of the scheme. NAV is defined as the
market value of the Mutual Fund scheme's assets net of its liabilities. NAV of a scheme is
calculated by dividing the market value of scheme's assets by the total number of units issued to
the
investors.

ADVANTAGES OF MUTUAL FUND

S. No.
Advantage
1.
Portfolio
Diversification
2.

3.

4.
5.
6.

7.

8.

9.

Particulars
Mutual Funds invest in a well-diversified portfolio of securities which enables
investor to hold a diversified investment portfolio (whether the amount of
investment is big or small).
Professional
Fund manager undergoes through various research works and has better
Management
investment management skills which ensure higher returns to the investor than
what he can manage on his own.
Less Risk
Investors acquire a diversified portfolio of securities even with a small
investment in a Mutual Fund. The risk in a diversified portfolio is lesser than
investing in merely 2 or 3 securities.
Low Transaction
Due to the economies of scale (benefits of larger volumes), mutual funds pay
Costs
lesser transaction costs. These benefits are passed on to the investors.
Liquidity
An investor may not be able to sell some of the shares held by him very easily
and quickly, whereas units of a mutual fund are far more liquid.
Choice of Schemes >Mutual funds provide investors with various schemes with different
investment objectives. Investors have the option of investing in a scheme
having a correlation between its investment objectives and their own financial
goals. These schemes further have different plans/options
Transparency
Funds provide investors with updated information pertaining to the markets
and the schemes. All material facts are disclosed to investors as required by
the regulator.
Flexibility
Investors also benefit from the convenience and flexibility offered by Mutual
Funds. Investors can switch their holdings from a debt scheme to an equity
scheme and vice-versa. Option of systematic (at regular intervals) investment
and withdrawal is also offered to the investors in most open-end schemes.
Safety
Mutual Fund industry is part of a well-regulated investment environment where
the interests of the investors are protected by the regulator. All funds are
registered with SEBI and complete transparency is forced.
DISADVANTAGES OF MUTUAL FUND

S. No.
Disadvantage
1.
Costs Control Not
in the Hands of an
Investor
2.
No Customized
Portfolios

Particulars
Investor has to pay investment management fees and fund distribution
costs as a percentage of the value of his investments (as long as he holds
the units), irrespective of the performance of the fund.
The portfolio of securities in which a fund invests is a decision taken by
the fund manager. Investors have no right to interfere in the decision

3.

Difficulty in
Selecting a
Suitable Fund
Scheme

making process of a fund manager, which some investors find as a

constraint in achieving their financial objectives.
Many investors find it difficult to select one option from the plethora of
funds/schemes/plans available. For this, they may have to take advice
from financial planners in order to invest in the right fund to achieve their
objectives.

TYPES OF MUTUAL FUNDS

General Classification of Mutual Funds

Open-end Funds | Closed-end Funds

Open-end Funds
Funds that can sell and purchase units at any point in time are classified as Open-end Funds. The fund
size (corpus) of an open-end fund is variable (keeps changing) because of continuous selling (to investors)
and repurchases (from the investors) by the fund. An open-end fund is not required to keep selling new
units to the investors at all times but is required to always repurchase, when an investor wants to sell his
units. The NAV of an open-end fund is calculated every day.
Closed-end Funds
Funds that can sell a fixed number of units only during the New Fund Offer (NFO) period are known as
Closed-end Funds. The corpus of a Closed-end Fund remains unchanged at all times. After the closure of
the offer, buying and redemption of units by the investors directly from the Funds is not allowed. However,
to protect the interests of the investors, SEBI provides investors with two avenues to liquidate their
positions:
1. Closed-end Funds are listed on the stock exchanges where investors can buy/sell units

from/to each other. The trading is generally done at a discount to the NAV of the scheme.
The NAV of a closed-end fund is computed on a weekly basis (updated every Thursday)...
2. Closed-end Funds may also offer "buy-back of units" to the unit holders. In this case, the
corpus of the Fund and its outstanding units do get changed.
Load Funds | No-load Funds
Load Funds
Mutual Funds incur various expenses on marketing, distribution, advertising, portfolio churning, fund
manager's salary etc. Many funds recover these expenses from the investors in the form of load. These
funds are known as Load Funds. A load fund may impose following types of loads on the investors:
1. Entry Load - Also known as Front-end load, it refers to the load charged to an investor at the
time of his entry into a scheme. Entry load is deducted from the investor's contribution
amount to the fund.
2. Exit Load - Also known as Back-end load, these charges are imposed on an investor when

he redeems his units (exits from the scheme). Exit load is deducted from the redemption
proceeds to an outgoing investor.
3. Deferred Load - Deferred load is charged to the scheme over a period of time.
4. Contingent Deferred Sales Charge (CDSC) - In some schemes, the percentage of exit load
reduces as the investor stays longer with the fund. This type of load is known as Contingent
Deferred Sales Charge.
No-load Funds
All those funds that do not charge any of the above mentioned loads are known as No-load Funds.
Tax-exempt Funds | Non-Tax-exempt Funds
Tax-exempt Funds
Funds that invest in securities free from tax are known as Tax-exempt Funds. All open-end equity oriented
funds are exempt from distribution tax (tax for distributing income to investors). Long term capital gains and
dividend income in the hands of investors are tax-free.
Non-Tax-exempt Funds
Funds that invest in taxable securities are known as Non-Tax-exempt Funds. In India, all funds, except
open-end equity oriented funds are liable to pay tax on distribution income. Profits arising out of sale of
units by an investor within 12 months of purchase are categorized as short-term capital gains, which are
taxable. Sale of units of an equity oriented fund is subject to Securities Transaction Tax (STT). STT is
deducted from the redemption proceeds to an investor.
BROAD MUTUAL FUND TYPES

1. Equity Funds
Equity funds are considered to be the more risky funds as compared to other fund types, but they
also provide higher returns than other funds. It is advisable that an investor looking to invest in an
equity fund should invest for long term i.e. for 3 years or more. There are different types of equity
funds each falling into different risk bracket. In the order of decreasing risk level, there are following
types of equity funds:
a. Aggressive Growth Funds - In Aggressive Growth Funds, fund managers aspire for

maximum capital appreciation and invest in less researched shares of speculative nature.
Because of these speculative investments Aggressive Growth Funds become more volatile
and thus, are prone to higher risk than other equity funds.
b. Growth Funds - Growth Funds also invest for capital appreciation (with time horizon of 3 to
5 years) but they are different from Aggressive Growth Funds in the sense that they invest
in companies that are expected to outperform the market in the future. Without entirely
adopting speculative strategies, Growth Funds invest in those companies that are expected
to post above average earnings in the future.
c. Speciality Funds - Speciality Funds have stated criteria for investments and their portfolio
comprises of only those companies that meet their criteria. Criteria for some speciality
funds could be to invest/not to invest in particular regions/companies. Speciality funds are
concentrated and thus, are comparatively riskier than diversified funds..

There are following types of speciality funds:

Sector Funds: Speciality Funds have stated criteria for investments and their
portfolio comprises of only those companies that meet their criteria. Criteria for
some speciality funds could be to invest/not to invest in particular
regions/companies. Speciality funds are concentrated and thus, are comparatively
riskier than diversified funds.. There are following types of speciality funds:
ii.
Foreign Securities Funds: Foreign Securities Equity Funds have the option to
invest in one or more foreign companies. Foreign securities funds achieve
international diversification and hence they are less risky than sector funds.
However, foreign securities funds are exposed to foreign exchange rate risk and
country risk.
iii.
Mid-Cap or Small-Cap Funds: Funds that invest in companies having lower
market capitalization than large capitalization companies are called Mid-Cap or
Small-Cap Funds. Market capitalization of Mid-Cap companies is less than that of
big, blue chip companies (less than Rs. 2500 crores but more than Rs. 500 crores)
and Small-Cap companies have market capitalization of less than Rs. 500 crores.
Market Capitalization of a company can be calculated by multiplying the market
price of the company's share by the total number of its outstanding shares in the
market. The shares of Mid-Cap or Small-Cap Companies are not as liquid as of
Large-Cap Companies which gives rise to volatility in share prices of these
companies and consequently, investment gets risky.
iv. Option Income Funds*: While not yet available in India, Option Income Funds
write options on a large fraction of their portfolio. Proper use of options can help to
reduce volatility, which is otherwise considered as a risky instrument. These funds
invest in big, high dividend yielding companies, and then sell options against their
stock positions, which generate stable income for investors.
d. Diversified Equity Funds - Except for a small portion of investment in liquid money
market, diversified equity funds invest mainly in equities without any concentration on a
particular sector(s). These funds are well diversified and reduce sector-specific or
company-specific risk. However, like all other funds diversified equity funds too are exposed
to equity market risk. One prominent type of diversified equity fund in India is Equity Linked
Savings Schemes (ELSS). As per the mandate, a minimum of 90% of investments by ELSS
should be in equities at all times. ELSS investors are eligible to claim deduction from
taxable income (up to Rs 1 lakh) at the time of filing the income tax return. ELSS usually
has a lock-in period and in case of any redemption by the investor before the expiry of the
lock-in period makes him liable to pay income tax on such income(s) for which he may have
received any tax exemption(s) in the past.
e. Equity Index Funds - Equity Index Funds have the objective to match the performance of
a specific stock market index. The portfolio of these funds comprises of the same
companies that form the index and is constituted in the same proportion as the index.
Equity index funds that follow broad indices (like S&P CNX Nifty, Sensex) are less risky
than equity index funds that follow narrow sectoral indices (like BSEBANKEX or CNX Bank
Index etc). Narrow indices are less diversified and therefore, are more risky.
f. Value Funds - Value Funds invest in those companies that have sound fundamentals and
whose share prices are currently under-valued. The portfolio of these funds comprises of
shares that are trading at a low Price to Earning Ratio (Market Price per Share / Earning
per Share) and a low Market to Book Value (Fundamental Value) Ratio. Value Funds may
i.

select companies from diversified sectors and are exposed to lower risk level as compared
to growth funds or speciality funds. Value stocks are generally from cyclical industries (such
as cement, steel, sugar etc.) which make them volatile in the short-term. Therefore, it is
advisable to invest in Value funds with a long-term time horizon as risk in the long term, to a
large extent, is reduced.
g. Equity Income or Dividend Yield Funds - The objective of Equity Income or Dividend
Yield Equity Funds is to generate high recurring income and steady capital appreciation for
investors by investing in those companies which issue high dividends (such as Power or
Utility companies whose share prices fluctuate comparatively lesser than other companies'
share prices). Equity Income or Dividend Yield Equity Funds are generally exposed to the
lowest risk level as compared to other equity funds.

2. Debt / Income Funds

Funds that invest in medium to long-term debt instruments issued by private companies, banks,
financial institutions, governments and other entities belonging to various sectors (like
infrastructure companies etc.) are known as Debt / Income Funds. Debt funds are low risk profile
funds that seek to generate fixed current income (and not capital appreciation) to investors. In
order to ensure regular income to investors, debt (or income) funds distribute large fraction of their
surplus to investors. Although debt securities are generally less risky than equities, they are subject
to credit risk (risk of default) by the issuer at the time of interest or principal payment. To minimize
the risk of default, debt funds usually invest in securities from issuers who are rated by credit rating
agencies and are considered to be of "Investment Grade". Debt funds that target high returns are
more risky. Based on different investment objectives, there can be following types of debt funds:
a. Diversified Debt Funds - Debt funds that invest in all securities issued by entities

belonging to all sectors of the market are known as diversified debt funds. The best feature
of diversified debt funds is that investments are properly diversified into all sectors which
results in risk reduction. Any loss incurred, on account of default by a debt issuer, is shared
by all investors which further reduces risk for an individual investor.
b. Focused Debt Funds* - Debt funds that invest in all securities issued by entities belonging
to all sectors of the market are known as diversified debt funds. The best feature of
diversified debt funds is that investments are properly diversified into all sectors which
results in risk reduction. Any loss incurred, on account of default by a debt issuer, is shared
by all investors which further reduces risk for an individual investor.
c. High Yield Debt funds - As we now understand that risk of default is present in all debt
funds, and therefore, debt funds generally try to minimize the risk of default by investing in
securities issued by only those borrowers who are considered to be of "investment grade".
But, High Yield Debt Funds adopt a different strategy and prefer securities issued by those
issuers who are considered to be of "below investment grade". The motive behind adopting
this sort of risky strategy is to earn higher interest returns from these issuers. These funds
are more volatile and bear higher default risk, although they may earn at times higher
returns for investors.
d. Assured Return Funds - Although it is not necessary that a fund will meet its objectives or
provide assured returns to investors, but there can be funds that come with a lock-in period

and offer assurance of annual returns to investors during the lock-in period. Any shortfall in
returns is suffered by the sponsors or the Asset Management Companies (AMCs). These
funds are generally debt funds and provide investors with a low-risk investment opportunity.
However, the security of investments depends upon the net worth of the guarantor (whose
name is specified in advance on the offer document). To safeguard the interests of
investors, SEBI permits only those funds to offer assured return schemes whose sponsors
have adequate net-worth to guarantee returns in the future. In the past, UTI had offered
assured return schemes (i.e. Monthly Income Plans of UTI) that assured specified returns
to investors in the future. UTI was not able to fulfill its promises and faced large shortfalls in
returns. Eventually, government had to intervene and took over UTI's payment obligations
on itself. Currently, no AMC in India offers assured return schemes to investors, though
possible.
e. Fixed Term Plan Series - Fixed Term Plan Series usually are closed-end schemes having
short term maturity period (of less than one year) that offer a series of plans and issue units
to investors at regular intervals. Unlike closed-end funds, fixed term plans are not listed on
the exchanges. Fixed term plan series usually invest in debt / income schemes and target
short-term investors. The objective of fixed term plan schemes is to gratify investors by
generating some expected returns in a short period.

3. Gilt Funds
Also known as Government Securities in India, Gilt Funds invest in government papers (named
dated securities) having medium to long term maturity period. Issued by the Government of India,
these investments have little credit risk (risk of default) and provide safety of principal to the
investors. However, like all debt funds, gilt funds too are exposed to interest rate risk. Interest rates
and prices of debt securities are inversely related and any change in the interest rates results in a
change in the NAV of debt/gilt funds in an opposite direction.
4. Money Market / Liquid Funds
Money market / liquid funds invest in short-term (maturing within one year) interest bearing debt
instruments. These securities are highly liquid and provide safety of investment, thus making
money market / liquid funds the safest investment option when compared with other mutual fund
types. However, even money market / liquid funds are exposed to the interest rate risk. The typical
investment options for liquid funds include Treasury Bills (issued by governments), Commercial
papers (issued by companies) and Certificates of Deposit (issued by banks).
5. Hybrid Funds
As the name suggests, hybrid funds are those funds whose portfolio includes a blend of equities,
debts and money market securities. Hybrid funds have an equal proportion of debt and equity in
their portfolio. There are following types of hybrid funds in India:

a. Balanced Funds - The portfolio of balanced funds include assets like debt securities,

convertible securities, and equity and preference shares held in a relatively equal
proportion. The objectives of balanced funds are to reward investors with a regular income,
moderate capital appreciation and at the same time minimizing the risk of capital erosion.
Balanced funds are appropriate for conservative investors having a long term investment
horizon.
b. Growth-and-Income Funds - Funds that combine features of growth funds and income
funds are known as Growth-and-Income Funds. These funds invest in companies having
potential for capital appreciation and those known for issuing high dividends. The level of
risks involved in these funds is lower than growth funds and higher than income funds.
c. Asset Allocation Funds - Mutual funds may invest in financial assets like equity, debt,
money market or non-financial (physical) assets like real estate, commodities etc.. Asset
allocation funds adopt a variable asset allocation strategy that allows fund managers to
switch over from one asset class to another at any time depending upon their outlook for
specific markets. In other words, fund managers may switch over to equity if they expect
equity market to provide good returns and switch over to debt if they expect debt market to
provide better returns. It should be noted that switching over from one asset class to
another is a decision taken by the fund manager on the basis of his own judgment and
understanding of specific markets, and therefore, the success of these funds depends upon
the skill of a fund manager in anticipating market trends.

6. Commodity Funds
Those funds that focus on investing in different commodities (like metals, food grains, crude oil
etc.) or commodity companies or commodity futures contracts are termed as Commodity Funds. A
commodity fund that invests in a single commodity or a group of commodities is a specialized
commodity fund and a commodity fund that invests in all available commodities is a diversified
commodity fund and bears less risk than a specialized commodity fund. "Precious Metals Fund"
and Gold Funds (that invest in gold, gold futures or shares of gold mines) are common examples of
commodity funds.

7. Real Estate Funds

Funds that invest directly in real estate or lend to real estate developers or invest in
shares/securitized assets of housing finance companies, are known as Specialized Real Estate
Funds. The objective of these funds may be to generate regular income for investors or capital
appreciation.

8. Exchange Traded Funds (ETF)

Exchange Traded Funds provide investors with combined benefits of a closed-end and an openend mutual fund. Exchange Traded Funds follow stock market indices and are traded on stock
exchanges like a single stock at index linked prices. The biggest advantage offered by these funds
is that they offer diversification, flexibility of holding a single share (tradable at index linked prices)
at the same time. Recently introduced in India, these funds are quite popular abroad.

9. Fund of Funds
Mutual funds that do not invest in financial or physical assets, but do invest in other mutual fund
schemes offered by different AMCs, are known as Fund of Funds. Fund of Funds maintain a

portfolio comprising of units of other mutual fund schemes, just like conventional mutual funds
maintain a portfolio comprising of equity/debt/money market instruments or non financial assets.
Fund of Funds provide investors with an added advantage of diversifying into different mutual fund
schemes with even a small amount of investment, which further helps in diversification of risks.
However, the expenses of Fund of Funds are quite high on account of compounding expenses of
investments into different mutual fund schemes.

UNDERSTANDING MUTUAL FUND SCHEMES AVAILABLE IN INDIA

There are around 1000 mutual fund schemes available in India. For most investors these are just
too many. These are not only hard to understand but also hard to distinguish between. I plan to
make this task a bit simpler by making a master classification of all the types of mutual
fund schemes available in Indian markets. While the task is very time consuming and complex, I
intend to start it with whatever information comes to my mind. Over time I shall do more research
and add more to this post. The initial look of the classification itself makes me confident that this
initiative shall make understanding the broader positioning of all the available schemes a bit easier.

Broad classification of Mutual Funds

Open end and closed end funds

Load funds and No-Load funds

Tax-Exempt and Non Tax-Exempt funds

Actively managed and passive funds

Accrual funds and capital appreciation funds

Equity, Debt and hybrid funds

Funds based on the Investments Objective

Debt Funds
Funds based on the duration of securities in portfolio
1. Money market mutual funds
2. Ultra short term debt fund
3. Short term Debt funds

4. Medium term Debt funds

5. Long term debt funds
Funds based classified on the basis of credit quality of securities in the portfolio
1. Government Securities fund
2. Corporate Bond fund
3. High yield Debt fund
Funds based on sensitivity to interest rate risk
1. Fixed interest rate funds
2. Floating rate funds
Funds based on flexibility to alter the portfolio
1. Dynamic asset allocation funds
2. Income funds
Funds based on the liquidation options

Fixed Maturity Plans

Equity Funds
Funds based on level of diversification
1. Diversified Equity funds
2. Sector Funds
Funds based on growth potential
1. Aggressive growth funds
2. Growth funds
3. Value funds
Fund based on tax benefit

ELSS fund

Funds based on fund management style

1. Actively managed funds

2. Index funds
Fund based on level of volatility

Equity Income or Dividend Yield Funds

Funds based on themes

1. Specialty funds
2.Thematic funds
Market Capitalization orientated funds
1. Small-cap funds
2. Mid-cap funds
3. Large-cap funds
4. Multi-cap funds
5. Flex-cap funds
Funds based on geographies
1. Overseas fund
2. Feeder funds
3. Country specific funds
Funds based on investment strategies
1. Life cycle stage fund
2. Dynamic P/E funds
Hybrid funds
1. Balanced fund
2. Monthly Income Fund/ Predominantly Debt fund
3. Oriented towards capital protection funds
Other funds
1. Commodity funds 2. Gold Funds
5. Real Estate funds

3. Fund of Funds 4.Exchange traded funds

What Types of Mutual Funds Are There?

There are many types of mutual funds. How you organize them is the challenge. You can
organize them by asset class, objective, type of management etc. Here are the basic types of
mutual funds and a bit about each one:

Mutual Fund Asset Classes By far this is the most logical way to define a specific type
of mutual fund investment. Mutual funds all invest their assets into different securities. Those
securities all have certain characteristics such as small companies, emerging market
companies, foreign bonds, etc. Those asset classes all exhibit similar risk/return profiles and
characteristics. We highly believe in investing in mutual funds based on their asset class
exposure over every other type of mutual fund classification.
Mutual Fund Objectives Is your mutual fund aiming for growth, income, or a balance of
both? Is your mutual fund designed to be a hedge against some other investment you may
own? Mutual fund objectives vary widely.
Mutual Fund Sectors Some mutual funds are organizes or referred to by sector, as the
sector is the predominant driver in what those mutual funds invest in. For example, some
mutual funds invest only in technology stocks, or utility stocks. Some mutual funds invest only
in transportation stocks or industrials. Each sector has a specific risk/reward profile to it.
Asset Allocation Funds Some mutual funds invest in broadly diversified securities and
attempt to balance a portfolio for a certain clients risk/reward profile. These are asset
allocation mutual funds. For example an aggressive asset allocation fund may invest 80% in
stocks around the world and 20% in bonds. A conservative asset allocation fund may invest
the inverse of that. Theyre designed to simplify the mutual fund investing process for
investors by packaging a lot of asset classes into one mutual fund.
Target Date Mutual Funds Target date mutual funds are very similar to asset allocation
mutual funds, but they adjust their securities based on time. For example, a 2020 target date
fund would gradually allocate its investments more conservatively until that 2020 date was
reached when its intended to be withdrawn. You want less risk when youll need the funds,
this is why they base these investment funds off a target date. A 2045 target date mutual fund
may be highly aggressive now, and invest gradually more conservatively until that ultimate
termination date in 2045.
Index Mutual Funds Some investors or managers will classify mutual funds based off an
index. For example theyll refer to an S&P 500 index mutual fund. That fund will nearly mirror
the securities in the S&P 500 allowing you as an investor to basically own the S&P 500.
Some index mutual funds will own bonds, and mirror all bonds in the short term government
category for example. There are many index mutual funds and theyve gained a tremendous
amount in popularity in the last decade.
Types of Mutual Fund Management Styles There are two main types of mutual fund
management styles. There is the passive style of mutual fund management (like an index
fund for example) where the management team doesnt attempt to pick stocks or time the
market, rather they just own all securities in a certain asset class with disregard to what looks
good or which company has good earnings. Theres also the active management style, in
which the management decides theyre going to try and beat the market benchmarks by

picking the right securities at the right time and trading the portfolio. Personally, we far prefer
passive investment management.

Average Assets under Management

Assets under management (AUM) is a financial term denoting the market value of all the funds
being managed by a financial institution (a mutual fund, hedge fund, private equity firm, venture
capital firm, or brokerage house) on behalf of its clients, investors, partners, depositors, etc.
The average Assets under management of all Mutual funds in India for the quarter Jul-13 to Sep13 (in INR billion) is given below:
Sr No

Mutual Fund Name

Average AUM

HDFC Mutual Fund

1,034.42

12.70%

Reliance Mutual Fund

952.28

11.69%

ICICI Prudential Mutual Fund

853.03

10.48%

Birla Sun Life Mutual Fund

773.44

9.50%

UTI Mutual Fund

700.57

8.60%

SBI Mutual Fund

595.58

7.31%

Franklin Templeton Mutual Fund 448.12

5.50%

IDFC Mutual Fund

396.65

4.87%

Kotak Mahindra Mutual Fund

352.99

4.34%

10

DSP BlackRock Mutual Fund

304.86

3.74%

11

Tata Mutual Fund

179.66

2.21%

12

Deutsche Mutual Fund

170.59

2.10%

13

L&T Mutual Fund

150.79

1.85%

14

Sundaram Mutual Fund

139.47

1.71%

15

JPMorgan Mutual Fund

132.57

1.63%

16

Religare Invesco Mutual Fund

125.12

1.54%

17

Axis Mutual Fund

123.18

1.51%

18

LIC NOMURA Mutual Fund

79.76

0.98%

19

Canara Robeco Mutual Fund

76.16

0.94%

20

HSBC Mutual Fund

67.18

0.83%

21

JM Financial Mutual Fund

62.44

0.77%

22

Baroda Pioneer Mutual Fund

52.63

0.65%

23

IDBI Mutual Fund

47.71

0.59%

24

PRINCIPAL Mutual Fund

43.00

0.53%

25

Goldman Sachs Mutual Fund

41.49

0.51%

26

BNP Paribas Mutual Fund

35.38

0.43%

27

Morgan Stanley Mutual Fund

32.90

0.40%

28

Peerless Mutual Fund

28.35

0.35%

29

Taurus Mutual Fund

27.32

0.34%

30

Pramerica Mutual Fund

21.66

0.27%

31

Union KBC Mutual Fund

19.80

0.24%

32

Indiabulls Mutual Fund

16.06

0.20%

33

ING Mutual Fund

11.05

0.14%

34

PineBridge Mutual Fund

11.03

0.14%

35

BOI AXA Mutual Fund

10.82

0.13%

36

Mirae Asset Mutual Fund

5.08

0.06%

37

Motilal Oswal Mutual Fund

4.37

0.05%

38

Quantum Mutual Fund

3.15

0.04%

39

PPFAS Mutual Fund

2.67

0.03%

40

Escorts Mutual Fund

2.52

0.03%

41

Sahara Mutual Fund

2.33

0.03%

42

IIFL Mutual Fund

2.07

0.03%

43

Edelweiss Mutual Fund

1.94

0.02%

44

Daiwa Mutual Fund

0.51

0.01%

45

IL&FS Mutual Fund (IDF)

0.00%

46

Shriram Mutual Fund

0.00%

47

SREI Mutual Fund (IDF)

0.00%

Grand Total

8,142.68

100.0%

REGULATIONS OF INDIAN MUTUAL FUNDS

14 Important Steps Taken by SEBI for Regulating Mutual Funds in India
(1) Formation:
Certain structural changes have also been made in the mutual fund industry, as part of which
mutual funds are required to set up asset management companies with fifty percent independent
directors, separate board of trustee companies, consisting of a minimum fifty percent of
independent trustees and to appoint independent custodians.
This is to ensure an arms length relationship between trustees, fund managers and custodians,
and is in contrast with the situation prevailing earlier in which all three functions were often
performed by one body which was usually the sponsor of the fund or a subsidiary of the sponsor.
Thus, the process of forming and floating mutual funds has been made a tripartite exercise by
authorities. The trustees, the asset management companies (AMCs) and the mutual fund
shareholders form the three legs. SEBI guidelines provide for the trustees to maintain an arms
length relationship with the AMCs and do all those things that would secure the right of investors.
With funds being managed by AMCs and custody of assets remaining with trustees, an element of
counter-balancing of risks exists as both can keep tabs on each other.
(2) Registration:
In January 1993, SEBI prescribed registration of mutual funds taking into account track record of a
sponsor, integrity in business transactions and financial soundness while granting permission.
This will curb excessive growth of the mutual funds and protect investors interest by registering
only the sound promoters with a proven track record and financial strength. In February 1993, SEBI
cleared six private sector mutual funds viz. 20th Century Finance Corporation, Industrial Credit &
Investment Corporation of India, Tata Sons, Credit Capital Finance Corporation, Ceat Financial
Services and Apple Industries.
(3) Documents:

The offer documents of schemes launched by mutual funds and the scheme particulars are
required to be vetted by SEBI. A standard format for mutual fund prospectuses is being formulated.
(4) Code of advertisement:
Mutual funds have been required to adhere to a code of advertisement.
(5) Assurance on returns:
SEBI has introduced a change in the Securities Control and Regulations Act governing the mutual
funds. Now the mutual funds were prevented from giving any assurance on the land of returns they
would be providing. However, under pressure from the mutual funds, SEBI revised the guidelines
allowing assurances on return subject to certain conditions.
Hence, only those mutual funds which have been in the market for at least five years are allowed to
assure a maximum return of 12 per cent only, for one year. With this, SEBI, by default, allowed
public sector mutual funds an advantage against the newly set up private mutual funds.
As per basic tenets of investment, it can be justifiably argued that investments in the capital market
carried a certain amount of risk, and any investor investing in the markets with an aim of making
profit from capital appreciation, or otherwise, should also be prepared to bear the risks of loss.
(6) Minimum corpus:
The current SEBI guidelines on mutual funds prescribe a minimum start-up corpus of Rs.50 crore
for a open-ended scheme, and Rs.20 crore corpus for closed-ended scheme, failing which
application money has to be refunded.
The idea behind forwarding such a proposal to SEBI is that in the past, the minimum corpus
requirements have forced AMCs to solicit funds from corporate bodies, thus reducing mutual funds
into quasi-portfolio management outfits. In fact, the Association of Mutual Funds in India (AMFI)
has repeatedly appealed to the regulatory authorities for scrapping the minimum corpus
requirements.
(7) Institutionalisation:
The efforts of SEBI have, in the last few years, been to institutionalise the market by introducing
proportionate allotment and increasing the minimum deposit amount to Rs.5000 etc. These efforts
are to channel the investment of individual investors into the mutual funds.
(8) Investment of funds mobilised:
In November 1992, SEBI increased the time limit from six months to nine months within which the
mutual funds have to invest resources raised from the latest tax saving schemes. The guideline

was issued to protect the mutual funds from the disadvantage of investing funds in the bullish
market at very high prices and suffering from poor NAV thereafter.
(9) Investment in money market:
SEBI guidelines say that mutual funds can invest a maximum of 25 per cent of resources mobilised
into money-market instruments in the first six months after closing the funds and a maximum of 15
per cent of the corpus after six months to meet short term liquidity requirements.
Private sector mutual funds, for the first time, were allowed to invest in the call money market after
this years budget. However, as SEBI regulations limit their exposure to money markets, mutual
funds are not major players in the call money market. Thus, mutual funds do not have a significant
impact on the call money market.
(10) Valuation of investment:
The transparent and well understood declaration or Net Asset Values (NAVs) of mutual fund
schemes is an important issue in providing investors with information as to the performance of the
fund. SEBI has warned some mutual funds earlier of unhealthy market
(11) Inspection:
SEBI inspect mutual funds every year. A full SEBI inspection of all the 27 mutual funds was
proposed to be done by the March 1996 to streamline their operations and protect the investors
interests. Mutual funds are monitored and inspected by SEBI to ensure compliance with the
regulations.
(12) Underwriting:
In July 1994, SEBI permitted mutual funds to take up underwriting of primary issues as a part of
their investment activity. This step may assist the mutual funds in diversifying their business.
(13) Conduct:
In September 1994, it was clarified by SEBI that mutual funds shall not offer buy back schemes or
assured returns to corporate investors. The Regulations governing Mutual Funds and Portfolio
Managers ensure transparency in their functioning.
(14) Voting rights:
In September 1993, mutual funds were allowed to exercise their voting rights. Department of
Company Affairs has reportedly granted mutual funds the right to vote as full-fledged shareholders
in companies where they have equity investments.

1. What are the forms in which business can be conducted by a foreign company in India?
Ans. A foreign company planning to set up business operations in India may:

Incorporate a company under the Companies Act, 1956, as a Joint Venture or a Wholly
Owned Subsidiary.
Set up a Liaison Office / Representative Office or a Project Office or a Branch Office of the
foreign company which can undertake activities permitted under the Foreign Exchange
Management (Establishment in India of Branch Office or Other Place of Business)
Regulations, 2000.

Q.2. What is the procedure for receiving Foreign Direct Investment in an Indian company?
Ans. An Indian company may receive Foreign Direct Investment under the two routes as given
under:
i. Automatic Route
FDI is allowed under the automatic route without prior approval either of the Government or the
Reserve Bank of India in all activities/sectors as specified in the consolidated FDI Policy, issued by
the Government of India from time to time.
ii. Government Route
FDI in activities not covered under the automatic route requires prior approval of the Government
which are considered by the Foreign Investment Promotion Board (FIPB), Department of Economic
Affairs, Ministry of Finance. Application can be made in Form FC-IL, which can be downloaded
from http://www.dipp.gov.in. Plain paper applications carrying all relevant details are also accepted.
No fee is payable.
The Indian company having received FDI either under the Automatic route or the Government
route is required to comply with provisions of the FDI policy including reporting the FDI to the
Reserve Bank. as stated in Q 4.
Q.3. What are the instruments for receiving Foreign Direct Investment in an Indian
company?
Ans. Foreign investment is reckoned as FDI only if the investment is made in equity shares , fully
and mandatorily convertible preference shares and fully and mandatorily convertible debentures
with the pricing being decided upfront as a figure or based on the formula that is decided upfront.
Any foreign investment into an instrument issued by an Indian company which:

gives an option to the investor to convert or not to convert it into equity or

does not involve upfront pricing of the instrument

as a date would be reckoned as ECB and would have to comply with the ECB guidelines.

The FDI policy provides that the price/ conversion formula of convertible capital instruments should
be determined upfront at the time of issue of the instruments. The price at the time of conversion
should not in any case be lower than the fair value worked out, at the time of issuance of such
instruments, in accordance with the extant FEMA regulations [the DCF method of valuation for the
unlisted companies and valuation in terms of SEBI (ICDR) Regulations, for the listed companies].
Q.4. What are the modes of payment allowed for receiving Foreign Direct Investment in an
Indian company?
Ans. An Indian company issuing shares /convertible debentures under FDI Scheme to a person
resident outside India shall receive the amount of consideration required to be paid for such shares
/convertible debentures by:
(i) Inward remittance through normal banking channels.
(ii) Debit to NRE / FCNR account of a person concerned maintained with an AD category I bank.
(iii) Conversion of royalty / lump sum / technical know how fee due for payment or conversion of
ECB, shall be treated as consideration for issue of shares.
(iv) Conversion of import payables / pre incorporation expenses / share swap can be treated as
consideration for issue of shares with the approval of FIPB.
(v) debit to non-interest bearing Escrow account in Indian Rupees in India which is opened with the
approval from AD Category I bank and is maintained with the AD Category I bank on behalf of
residents and non-residents towards payment of share purchase consideration.
If the shares or convertible debentures are not issued within 180 days from the date of receipt of
the inward remittance or date of debit to NRE / FCNR (B) / Escrow account, the amount shall be
refunded. Further, Reserve Bank may on an application made to it and for sufficient reasons permit
an Indian Company to refund / allot shares for the amount of consideration received towards issue
of security if such amount is outstanding beyond the period of 180 days from the date of receipt.
Q.5. Which are the sectors where FDI is not allowed in India, both under the Automatic
Route as well as under the Government Route?
Ans. FDI is prohibited under the Government Route as well as the Automatic Route in the following
sectors:
i) Atomic Energy
ii) Lottery Business
iii) Gambling and Betting
iv) Business of Chit Fund

v) Nidhi Company
vi) Agricultural (excluding Floriculture, Horticulture, Development of seeds, Animal Husbandry,
Pisciculture and cultivation of vegetables, mushrooms, etc. under controlled conditions and
services related to agro and allied sectors) and Plantations activities (other than Tea Plantations)
(c.f. Notification No. FEMA 94/2003-RB dated June 18, 2003).
vii) Housing and Real Estate business (except development of townships, construction of residential/commercial premises, roads or bridges to the extent specified in Notification No. FEMA
136/2005-RB dated July 19, 2005).
viii) Trading in Transferable Development Rights (TDRs).
ix) Manufacture of cigars , cheroots, cigarillos and cigarettes , of tobacco or of tobacco substitutes.
(Please also see the the website of Department of Industrial Policy and Promotion (DIPP), Ministry
of Commerce & Industry, Government of India at www.dipp.gov.in for details regarding sectors and
investment limits therein allowed ,under FDI)
Q.6. What is the procedure to be followed after investment is made under the Automatic
Route or with Government approval?
Ans. A two-stage reporting procedure has to be followed :.
On receipt of share application money:
Within 30 days of receipt of share application money/amount of consideration from the nonresident investor, the Indian company is required to report to the Foreign Exchange Department,
Regional Office concerned of the Reserve Bank of India,under whose jurisdiction its Registered
Office is located, the Advance Reporting Form, containing the following details :

Name and address of the foreign investor/s;

Date of receipt of funds and the Rupee equivalent;

Name and address of the authorised dealer through whom the funds have been received;

Details of the Government approval, if any; and

KYC report on the non-resident investor from the overseas bank remitting the amount of
consideration.

The Indian company has to ensure that the shares are issued within 180 days from the date of
inward remittance which otherwise would result in the contravention / violation of the FEMA
regulations.
Upon issue of shares to non-resident investors:

Within 30 days from the date of issue of shares, a report in Form FC-GPR- PART A together with
the following documents should be filed with the Foreign Exchange Department, Regional Office
concerned of the Reserve Bank of India.
Certificate from the Company Secretary of the company accepting investment from persons
resident outside India certifying that:

The company has complied with the procedure for issue of shares as laid down under the
FDI scheme as indicated in theNotification No. FEMA 20/2000-RB dated 3rd May 2000, as
amended from time to time.

The investment is within the sectoral cap / statutory ceiling permissible under the Automatic Route
of the Reserve Bank and it fulfills all the conditions laid down for investments under the Automatic
Route,
Q.7. What are the guidelines for transfer of existing shares from non-residents to residents
or residents to non-residents?
Ans. The term transfer is defined under FEMA as including "sale, purchase, acquisition,
mortgage, pledge, gift, loan or any other form of transfer of right, possession or lien {Section 2 (ze)
of FEMA, 1999}.
The following share transfers are allowed without the prior approval of the Reserve Bank of India
A. Transfer of shares from a Non Resident to Resident under the FDI scheme where the
pricing guidelines under FEMA, 1999 are not met provided that :i. The original and resultant investment are in line with the extant FDI policy and FEMA regulations
in terms of sectoral caps, conditionalities (such as minimum capitalization, etc.), reporting
requirements, documentation, etc.;
ii. The pricing for the transaction is compliant with the specific/explicit, extant and relevant SEBI
regulations / guidelines (such as IPO, Book building, block deals, delisting, exit, open offer/
substantial acquisition / SEBI SAST, buy back); and
iii. Chartered Accountants Certificate to the effect that compliance with the relevant SEBI
regulations / guidelines as indicated above is attached to the form FC-TRS to be filed with the AD
bank.
B. Transfer of shares from Resident to Non Resident:
i) where the transfer of shares requires the prior approval of the FIPB as per the extant FDI
policy provided that :
a) the requisite approval of the FIPB has been obtained; and

b) the transfer of share adheres with the pricing guidelines and documentation requirements as
specified by the Reserve Bank of India from time to time.
ii) where SEBI (SAST) guidelines are attracted subject to the adherence with the pricing
guidelines and documentation requirements as specified by Reserve Bank of India from time to
time.
iii) where the pricing guidelines under the Foreign Exchange Management Act (FEMA), 1999
are not met provided that:a. The resultant FDI is in compliance with the extant FDI policy and FEMA regulations in terms
of sectoral caps, conditionalities (such as minimum capitalization, etc.), reporting
requirements, documentation etc.;
b. The pricing for the transaction is compliant with the specific/explicit, extant and relevant
SEBI regulations / guidelines (such as IPO, Book building, block deals, delisting, exit, open
offer/ substantial acquisition / SEBI SAST); and
c. Chartered Accountants Certificate to the effect that compliance with the relevant SEBI
regulations / guidelines as indicated above is attached to the form FC-TRS to be filed with
the AD bank
iv) where the investee company is in the financial sector provided that :
a) NOCs are obtained from the respective financial sector regulators/ regulators of the investee
company as well as transferor and transferee entities and such NOCs are filed along with the form
FC-TRS with the AD bank; and
b) The FDI policy and FEMA regulations in terms of sectoral caps, conditionalities (such as
minimum capitalization, etc.), reporting requirements, documentation etc., are complied with.
Transfer of shares/ fully and mandatorily convertible debentures by way of Gift:
A person resident outside India can freely transfer shares/ fully and mandatorily convertible
debentures by way of gift to a person resident in India as under:

Any person resident outside India, (not being a NRI or an erstwhile OCB), can transfer by
way of gift the shares/ fully and mandatorily convertible debentures to any person resident
outside India (including NRIs but excluding OCBs).
Note: Transfer of shares from or by erstwhile OCBs would require prior approval of the
Reserve Bank of India.

a NRI may transfer by way of gift, the shares/convertible debentures held by him to another
NRI only,

Any person resident outside India may transfer share/ fully and mandatorily convertible
debentures to a person resident in India by way of gift.

MF History
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 of India. The history of mutual funds in India
can be broadly divided into four distinct phases
First Phase - 1964-1987
Unit Trust of India (UTI) was established in 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.
Second Phase - 1987-1993 (Entry of Public Sector Funds)
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.
Third Phase - 1993-2003 (Entry of Private Sector Funds)
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.
Fourth Phase - since February 2003
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, 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.
The graph indicates the growth of assets over the years.

List of Insurance Companies in India

There are many insurance companies providing their services in India. Some of the well known
companies are:
1. Aviva Life Insurance Company India Limited
2. HDFC Standard Life Insurance Company Limited
3. Bajaj Allianz Life Insurance Company Limited
4. Max New York Life Insurance Company Limited
5. Bharti AXA Insurance
6. Tata AIG General Insurance Company Limited

7. ICICI Prudential Life Insurance Company

8. Reliance General Insurance Company Limited
9. MetLife India Insurance Company Private Limited
10. Birla Sun Life Insurance
11. Kotak Mahindra Insurance Limited
12. United India Insurance Company Limited
13. New India Assurance Company
14. Royal Sundaram Alliance Limited
15. Cholamandalam Insurance MS Limited
16. Max Bupa Health Insurance

List of insurance companies in India

This list of Indian insurance companies is based on the list of insurance companies registered
and approved with the Insurance Regulatory and Development Authority.

General insurance companies

Public Sector

National Insurance Comp. Ltd.

Oriental Insurance comp. Ltd.
United India Insurance Comp. Ltd.
New India Assurance comp. Ltd.
life insurance corporation of india comp. ltd.

Private Sector

Bharti AXA General Insurance

Future Generali India Insurance

HDFC ERGO General Insurance
ICICI Lombard
IFFCO Tokio
Liberty Videocon General Insurance Co Ltd
L & T General Insurance
Magma HDI Generfgfgal Insurance Co Ltd
Raheja QBE General Insurance
Reliance General Insurance
Royal Sundaram
SBI General Insurance
Shriram General Insurance
Tata AIG General
Universal Sompo General Insurance
Cholamandalam MS General Insurance Company Limited
Apollo Munich Health Insurance

Standalone health insurance companies

Private Sector

Apollo Munich Health Insurance

Max Bupa Health Insurance
Religare Health Insurance Company Ltd
Star Health and Allied Insurance company Ltd

Life insurance companies

Public Sector
Life Insurance Corporation of India

Private Sector

AEGON Religare Life Insurance

Edelweiss Tokio Life Insurance Co. Ltd
Aviva India
Shriram Life Insurance
Bajaj Allianz Life Insurance
Bharti AXA Life Insurance Co Ltd
Birla Sun Life Insurance

Canara HSBC Oriental Bank of Commerce Life Insurance

Star Union Dai-ichi Life Insurance
DLF Pramerica Life Insurance
Future Generali Life Insurance Co Ltd
HDFC Standard Life Insurance Company Limited
ICICI Prudential
IDBI Federal Life Insurance
IndiaFirst Life Insurance Company
ING Vysya Life Insurance
Kotak Life Insurance
Max Life Insurance
PNB MetLife India Life Insurance
Reliance Life Insurance Company Limited
Sahara Life Insurance
SBI Life Insurance Company Limited
TATA AIA Life Insurance

Role of the Insurance Regulatory and Development Authority (IRDA)

The Insurance Regulatory and Development Authority(IRDA) was constituted to regulate and
develop insurance business in India. As a key part of its role, it is responsible to protect the rights
of policyholders. In order to create awareness about IRDA, it's role, duties and responsibilities are
stated here under:

IRDA provides a certificate of registration to a life insurance company.

IRDA is responsible for the renewal, modification, withdrawal, suspension or cancellation of
this certificate of registration.
IRDA frames regulations on protection of policyholders' interests.
It offers policyholders the right to voice their complaints against insurers or insurance
companies.
The IRDA has set up the grievance redressal cell to take up the complaints of the
policyholder.
It specifies the requisite qualifications, code of conduct and practical training for
intermediaries or insurance intermediaries and agents.

It specifies the code of conduct for surveyors and loss assessors;

It promotes efficiency in the conduct of insurance businesses;
It promotes and regulates activities of professional organisations connected with life
insurance;
It levies fees and other charges to carry out the purposes of the IRDA Act;
It can call for information from, undertake the inspection of, conduct enquiries and
investigations including the auditing of insurers, intermediaries, insurance intermediaries
and other organisations connected with the business of life insurance;
It specifies the form and manner in which books of account should be maintained and
statements of accounts should be rendered by insurers and other insurance intermediaries;
It regulates the investment of funds by insurance companies;
It regulates the maintenance of margins of solvency;
It adjudicates disputes between insurers and intermediaries or insurance intermediaries;
It specifies the percentage of premium income of the insurer to finance schemes for the
promotion and regulation of certain specified professional organisations;
It specifies the percentage of life insurance business to be undertaken by an insurer in the
rural or social sector; and
It exercises any other powers as may be prescribed

Duties, powers and functions of IRDA

The insurance regulator offers policyholders the right to voice their complaints against
insurance companies
The Insurance Regulatory and Development Authority (IRDA) was constituted to regulate
and develop insurance business and re-insurance business in India. As a key part of its
role, the insurance regulator is responsible to protect the rights of policyholders. Listed
below is a comprehensive picture of duties, powers and functions of the IRDA.
IRDA provides a certificate of registration to both life and general insurance company.
IRDA is responsible for the renewal, modification, withdrawal, suspension or cancellation of
this certificate of registration.
IRDA frames regulations on protection of policyholders interests.
It offers policyholders the right to voice their complaints against insurance companies.
The IRDA has set up the grievance redressal cell to take up the complaints of the
policyholder.
It specifies the requisite qualifications, code of conduct and practical training for insurance
intermediaries and agents.
The regulator promotes efficiency in the conduct of insurance businesses.

 It promotes and regulates activities of professional organisations connected with life and
general insurance.
It levies fees and other charges to carry out the purposes of the IRDA Act.
It can call for information from, undertake the inspection of, conduct enquiries including the
auditing of insurers, agents, brokers and other organisations connected with the business
of insurance.
It specifies the form in which books of account should be maintained and statements of
accounts should be rendered by insurers and other insurance intermediaries.
It regulates the investment of funds by insurance companies.
It regulates the maintenance of margins of solvency.
It adjudicates disputes between insurers and intermediaries or insurance intermediaries.
The regulator specifies the percentage of premium income of the insurer to finance
schemes for the promotion and regulation of certain specified professional organisations.
It specifies the percentage of life insurance business to be undertaken by an insurer in the
rural or social sector; and it exercises any other powers as may be prescribed.