6 Key SEBI Mutual Fund Updates in 2025 Investors Must Note

The Securities and Exchange Board of India (SEBI) proposed and implemented several regulatory changes in 2025 to improve investor protection, increase transparency, and reduce costs in the mutual fund industry. While some changes are still under consultation, several have already been finalised through circulars.

New MF-Lite Regime for Passive Funds

Effective March 16, 2025, SEBI launched the MF-Lite framework to relax compliance requirements for certain passively managed schemes, including Index Funds, Exchange Traded Funds (ETFs), and passive Funds of Funds (FoFs). 

The initiative aims to lower operational burdens while maintaining transparency and governance standards for passive investment products.

Revised Cut-Off Timings

SEBI introduced new cut-off timings for repurchase of units in liquid and overnight funds from June 1, 2025. Applications received up to 3:00 PM will be processed at the closing NAV of the preceding business day, while applications received after 3:00 PM will be processed at the next business day’s NAV. 

Online applications for overnight funds have an extended cut-off of 7:00 PM. Business days exclude days when money markets are closed or inaccessible.

Rules for Passive Breaches

To address unintended breaches of asset allocation limits caused by market events such as price fluctuations or corporate actions, SEBI now mandates clear timelines for rebalancing portfolios. This reduces prolonged exposure to unintended risks and ensures better risk management for investors.

Reduced Exit Load Cap

In September 2025, SEBI reduced the maximum permissible exit load from 5% to 3%, noting that most mutual fund schemes currently charge between 1% and 2%. This measure aims to streamline investor costs and standardise industry practices based on SEBI inspections and reviews.

Use of Liquid or Overnight Funds for IA and RA Deposits

Effective September 30, 2025, Investment Advisers (IAs) and Research Analysts (RAs) may meet mandatory deposit requirements using low-risk liquid or overnight funds instead of traditional bank deposits, ensuring security while enhancing flexibility.

Reclassification of REITs for Mutual Fund Investments

From January 1, 2026, SEBI will classify investments in Real Estate Investment Trusts (REITs) by mutual funds and specialised investment funds as equity-related instruments. 

Existing debt-scheme holdings as of December 31, 2025, will be grandfathered, but future investments may require portfolio adjustments, potentially increasing participation in REITs via equity schemes.

Also Read: Best Mutual Funds Launched in India in 2025!

Conclusion

The 2025 SEBI regulatory reforms reflect a strong focus on investor protection, transparency, and cost reduction. With MF-Lite, exit load rationalisation, passive breach guidelines, and REIT reclassification, mutual funds are expected to operate more efficiently while enhancing investor confidence and promoting greater market participation.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. This does not constitute a private recommendation/investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Mutual Fund investments are subject to market risks, read all scheme-related documents carefully.