Daijiworld Media Network - New Delhi
New Delhi, Feb 26: The Securities and Exchange Board of India (SEBI) on Thursday announced a sweeping overhaul of mutual fund categorisation norms, discontinuing the solution-oriented fund category — which included children’s and retirement schemes — in a move aimed at improving transparency and reducing complexity for investors.
With immediate effect, the regulator has stopped the solution-oriented category. Existing schemes under this segment will no longer be permitted to accept fresh investments and will be merged with other schemes that have comparable asset allocation patterns and risk profiles. These mergers will require prior regulatory approval.
As of January 31, 2026, the segment comprised 15 children’s fund schemes and 29 retirement fund schemes.
SEBI had first floated the proposed reforms in July 2025 as part of a broader review of mutual fund classifications. The objective was to streamline offerings, minimise portfolio overlap across schemes and introduce clearer distinctions between fund categories. At the time, the regulator had suggested allowing varying equity-debt combinations within solution-oriented schemes, provided the allocations aligned with the schemes’ stated objectives. It had also proposed permitting limited exposure to REITs and InvITs in the residual portion of such schemes, barring hybrid retirement and children’s funds, within prescribed limits.
In its latest circular dated February 26, SEBI unveiled a new classification structure that introduces categories such as contra funds, sectoral debt funds and goal-based life cycle funds. Asset management companies (AMCs) have been directed to realign their existing schemes with the revised framework within six months.
The regulator has additionally laid down tighter norms for launching Fund of Funds (FoFs) to promote discipline and prevent excessive product proliferation.
Market participants have welcomed the move. Nikunj Saraf, ceo of Choice Wealth, said the revised categorisation norms represent a significant step toward simplifying what had become an increasingly complex landscape for retail investors, making fund selection more transparent and easier to understand.