- SEBI's Amarjeet Singh urges mutual fund distributors to prioritize investor trust and suitability
- India's mutual fund assets surged from Rs 10 lakh crore in 2014 to Rs 85 lakh crore currently
- Distributor numbers rose from 2.4 lakh to 3.4 lakh in five years, handling 71% of retail assets
SEBI whole-time member Amarjeet Singh has warned India's rapidly expanding mutual fund distribution industry that asset growth cannot come at the cost of investor trust, urging distributors to put suitability, transparency and long-term investor outcomes ahead of customer acquisition.
Speaking at the NJ Partners Business Training 2026 event in association with FICCI on Thursday, Singh said the mutual fund industry has expanded sharply, but the next phase of growth will require stronger ethical standards. “Growth not built on investor trust will ultimately become difficult to sustain,” reports quoted him as saying.
Mutual fund industry crosses Rs 85 lakh crore
India's mutual fund assets under management have risen to around Rs 85 lakh crore, from Rs 10 lakh crore in 2014, representing more than an eight-fold increase in just over a decade.
Mutual fund folios have crossed 27 crore, while the number of unique investors has exceeded 6 crore, highlighting the growing participation of households in capital markets.
The distribution network has expanded alongside the industry. Active AMFI-registered distributors have increased from 2.4 lakh to 3.4 lakh over the past five years. Distributors continue to account for around 71% of mutual fund assets held by retail and HNI investors, making their role central to investor outcomes.
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SEBI flags mis-selling risks
Singh said intense competition, abundant financial information and viral market narratives can encourage distributors to focus more on acquiring customers than assessing whether a product is suitable for them.
He said ethical distribution should involve clear disclosure of risks and commissions, appropriate product suitability, continued engagement after the sale and regular capability-building as financial products become more complex.
Singh also warned about mis-selling that investors may not immediately recognise. His test for ethical advice was simple: whether a distributor would make the same recommendation in the same manner to a family member.
AI can improve distribution, but not replace trust
Singh said digital onboarding, mobile platforms and AI tools can reduce costs and improve access. However, they also create concerns around accountability, transparency, suitability, cybersecurity and data protection.
He specifically cautioned against “AI washing”, where claims about artificial intelligence capabilities go beyond what the technology actually delivers.
While technology can reduce the need for traditional intermediation, Singh said it cannot eliminate the importance of human interaction. Distributors will increasingly need to demonstrate clear and continuing value through deeper understanding of investor needs and sustained engagement.
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SEBI's proposed MF-only PMS framework
Singh also highlighted SEBI's consultation on a mutual fund-only Portfolio Management Services framework, which proposes investing exclusively in direct mutual fund plans, including ETFs and SIFs.
The proposed framework carries a Rs 25 lakh minimum investment, compared with Rs 50 lakh for conventional PMS. SEBI has also simplified the certification framework for SIFs, allowing appropriately certified distributors to distribute both mutual funds and SIFs.
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