1 Finance gets in-principle SEBI approval for MF Lite: Will investors get more choice in index funds and ETFs?

1 Finance has received in-principle SEBI approval for an MF Lite licence and plans to launch passive mutual funds in Q4 FY27. SEBI’s framework eases regulatory requirements for eligible passive fund houses, potentially encouraging competition and expanding investor choice in index funds and ETFs.

1 Finance has received in-principle approval from the Securities and Exchange Board of India (SEBI) for an asset management company (AMC) licence under the regulator’s Mutual Funds Lite (MF Lite) framework, paving the way for its entry into India’s passive mutual fund market.

The personal finance advisory and wealth-tech firm is targeting a launch in the fourth quarter of FY27, subject to completing regulatory and operational requirements and obtaining SEBI’s final registration. Its proposed AMC will focus on passive investment products such as index funds and exchange-traded funds (ETFs), according to the company’s press release dated 19 October.

The approval comes as SEBI seeks to encourage more asset managers to enter the passive fund segment through a separate regulatory framework with lighter compliance requirements. 1 Finance, which has more than ₹17,000 crore in assets under advice (AUA), plans to extend its existing financial planning business into investment products.

What is SEBI’s MF Lite framework?

SEBI introduced the MF Lite framework on 31 December 2024 to ease entry barriers for asset management companies seeking to offer eligible passive mutual fund schemes. Under the earlier regulatory framework, active and passive schemes were subject to a common set of requirements, including provisions relating to net worth, track record, profitability and ongoing compliance.

The regulator said several requirements designed for actively managed funds may not be necessary for passive schemes. The lighter framework aims to encourage new players, reduce compliance requirements, increase market penetration, facilitate investment diversification and foster innovation.