SEBI Revises Mutual Fund Scheme Categorisation | Supersedes Clause 2.6 of Master Circular

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Circular No. HO/24/13/15(2)2026-IMD-RAC4/I/5764/2026, Dated: 26.02.2026

The Securities and Exchange Board of India (SEBI) has issued a circular revising the framework on categorisation and rationalisation of mutual fund schemes. The circular supersedes clause 2.6 of Chapter 2 of the Master Circular for Mutual Funds dated June 27, 2024.

The revised framework introduces updated norms for scheme classification, structure, and disclosure to enhance clarity, transparency, and uniformity across mutual fund offerings.

1. Scheme Categories and Characteristics

The circular provides a revised structure for categorisation of mutual fund schemes and prescribes detailed characteristics for each category. It aims to ensure that schemes within a category follow clearly defined investment objectives and portfolio composition norms.

2. Uniform Description of Schemes

To promote consistency and improve investor understanding, SEBI has introduced a uniform description framework for mutual fund schemes.

Asset Management Companies (AMCs) are required to present scheme information using standardised descriptions, ensuring that investors can easily compare schemes across categories.

3. Portfolio Overlap Norms

The revised framework prescribes norms to minimise portfolio overlap among schemes within the same mutual fund. These measures are intended to:

  • Prevent duplication of similar schemes
  • Ensure clear differentiation in investment strategies
  • Enhance transparency for investors

4. Discontinuation of Solution Oriented Schemes

The circular provides for the discontinuation of Solution Oriented Schemes under the revised framework. Existing schemes in this category will be required to align with the updated categorisation and regulatory structure in accordance with SEBI’s directions.

5. Framework for Life Cycle Funds

SEBI has introduced a structured framework for Life Cycle Funds, enabling product offerings aligned with investors’ age and risk profiles.

This framework seeks to provide long-term, goal-based investment options with defined asset allocation strategies over different life stages.

6. Standardised Framework for Fund of Funds (FoF)

A standardised regulatory framework has also been prescribed for Fund of Fund (FoF) schemes, covering:

  • Categorisation and structure
  • Investment parameters
  • Disclosure norms
  • Portfolio construction requirements

This will ensure uniformity and clarity in FoF offerings across the mutual fund industry.

7. Objective of the Circular

The revised framework aims to:

  • Strengthen transparency and comparability of mutual fund schemes
  • Reduce investor confusion arising from similar or overlapping products
  • Promote standardisation in scheme disclosures and descriptions
  • Align mutual fund offerings with evolving investor needs and market practices

Mutual funds will be required to align their existing and new schemes with the revised categorisation and rationalisation framework as specified by SEBI.

Click Here To Read The Full Circular

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Author: Taxmann

Taxmann Publications has a dedicated in-house Research & Editorial Team. This team consists of a team of Chartered Accountants, Company Secretaries, and Lawyers. This team works under the guidance and supervision of editor-in-chief Mr Rakesh Bhargava.

The Research and Editorial Team is responsible for developing reliable and accurate content for the readers. The team follows the six-sigma approach to achieve the benchmark of zero error in its publications and research platforms. The team ensures that the following publication guidelines are thoroughly followed while developing the content:

  • The statutory material is obtained only from the authorized and reliable sources
  • All the latest developments in the judicial and legislative fields are covered
  • Prepare the analytical write-ups on current, controversial, and important issues to help the readers to understand the concept and its implications
  • Every content published by Taxmann is complete, accurate and lucid
  • All evidence-based statements are supported with proper reference to Section, Circular No., Notification No. or citations
  • The golden rules of grammar, style and consistency are thoroughly followed
  • Font and size that's easy to read and remain consistent across all imprint and digital publications are applied