Nov 28 (Reuters) – India’s markets regulator plans to decrease capital and disclosure necessities for fund homes that run passive funding schemes, in keeping with three sources with direct information of the matter.

Proposed new guidelines would additionally permit current fund homes to hive off their passive funding schemes into separate entities to benefit from the looser regulation, these individuals mentioned.

The Securities and Exchange Board of India (SEBI) will search public feedback on the proposals earlier than finalising the principles, the sources mentioned, declining to be recognized as they aren’t authorised to talk to the media.

SEBI didn’t reply to an electronic mail from Reuters.

The regulator first flagged the prospect of lighter rules for passive funds in its annual report in August. The particulars of these proposals haven’t been beforehand reported.

Assets underneath administration of passive funds surged sevenfold to 7.9 trillion rupees between July 2019 and September 2023 and now account for 17% of the entire business.

Passive funds replicate indexes, leaving much less discretion for fund managers.

SEBI plans to cut back the capital requirement for passive solely fund homes to about 100 million rupees from 500 million rupees presently, the sources mentioned.

The regulator will even prescribe extra liberal disclosure guidelines for such fund homes.

Instead of the present requirement of offering portfolio disclosures each two weeks or each month, passive solely fund homes might want to declare that they’re following a selected index each six months, two of the three sources mentioned.

Rules round sustaining name information of fund managers, presently required for all fund homes, might also be eased for passive solely funds, they mentioned.

“With the lighter touch regulations, global players such as Vanguard, State Street SPDRs, and others who have a core focus and expertise only in passive funds, can become more keen to set up business in India and launch a passive only fund houses under this proposed light touch regulations,” mentioned Anil Ghelani, head of passive investments and merchandise at DSP Asset Managers, an Indian asset administration agency.

In July, Blackrock (BLK.N), the world’s largest cash supervisor tied up with Mukesh Ambani’s Jio Financial Services (JIOF.NS) to launch a fund home in India however others like Vanguard are but to enter the Indian market.

SEBI might additionally loosen up guidelines to take away caps on passive funds’ exposures to particular person shares, mentioned the sources.

Existing guidelines say that no fund home can make investments greater than 25% of its belongings in a gaggle of related entities. A fund can even not maintain greater than 10% of the corporate’s paid-up capital.

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