SEBI eliminates the category of retirees and children’s mutual funds
In order to provide investors with greater clarity and transparency, the Securities and Exchange Board of India (SEBI) announced a significant reform of mutual fund categorization guidelines on Thursday and abolished the solution-oriented mutual fund category, which includes retirement and children’s funds.
According to the markets regulator, the solution-oriented category has been eliminated as of the circular’s date.
Current plans within this category will cease taking new members right away.
Subject to SEBI’s previous clearance, these schemes will now be combined with other schemes that share comparable asset allocation and risk characteristics.
There were 29 schemes in the retirement fund category and 15 schemes in the children’s fund category as of January 31, 2026.
As part of a more comprehensive assessment of mutual fund classification, SEBI first suggested modifications in July 2025.
Enhancing clarity, introducing new schemes, and addressing the problem of portfolio overlap amongst schemes were the objectives.
As long as the asset allocation was appropriate for the scheme’s declared goal, the regulator at the time had ruled that mutual funds should be permitted to provide a variety of schemes in the solution-oriented category with differing mixes of debt and equity.
The regulator also suggested that, within regulatory bounds, mutual funds be permitted to invest the remaining percentage of their solution-oriented schemes in REITs and InvITs, with the exception of Retirement Fund—Hybrid and Children’s Fund—Hybrid schemes.
SEBI added new categories such sectoral debt funds and contra funds in its most recent circular, which was published on February 26.
Additionally, it mandated that asset management companies (AMCs) link their current schemes with the new framework within six months and introduced goal-based life cycle funds.
To guarantee greater discipline in product offers, the regulator has also set limits for the creation of Fund of Funds (FoFs).
Sebi’s new mutual fund classification guidelines are a significant step toward streamlining an industry that has grown more complicated for individual investors, according to Nikunj Saraf, CEO of Choice Wealth.