The Securities and Exchange Board of India (SEBI), the regulator of capital markets, has made it clear that family trusts are not eligible to act as sponsors for mutual funds. This clarification comes in response to a query from First Water Capital Advisory LLP, which sought guidance on the matter.
According to SEBI, mutual fund regulations specify that a sponsor must be a body corporate operating either individually or in concert with another body corporate to establish mutual funds or mutual fund lite products. The regulator emphasized that since a family trust does not qualify as a body corporate, it is ineligible to fulfill the role of a mutual fund sponsor.
Additionally, the capital advisory firm raised a question regarding the possibility of a sponsor applying for a mutual fund license under Route-2. This route requires a sponsor to have a net worth of ₹150 crore, which includes ₹50 crore in equity share capital and ₹100 crore in preference shares that are redeemable only after the asset management company attains profitability for five consecutive years. However, SEBI did not address this specific query, as it was deemed not to pertain to policy concerns.
This guidance from SEBI aims to clarify the regulations governing mutual fund sponsorship in India.
Published on April 21, 2026.
