1 Finance Pvt Ltd received in-principle approval from the Securities and Exchange Board of India (SEBI) on 19 October 2026 to set up an Asset Management Company (AMC) under the Mutual Funds Lite (MF Lite) framework. The Mumbai-based advisory and wealth-tech firm plans to launch a passive-only fund house in the fourth quarter of FY27, subject to final registration. If cleared, 1 Finance will become the first AMC to operate entirely under MF Lite rules.
What Is an AMC in a Mutual Fund?
An Asset Management Company (AMC) is a company approved by SEBI that manages pooled investor money under a mutual fund trust. The AMC makes investment decisions, operates schemes, discloses net asset value daily, and charges a regulated fee called expense ratio for managing each scheme.
A mutual fund in India works through three parts. The sponsor promotes the fund. The trust and board of trustees hold the assets on behalf of investors. The AMC runs daily operations. This structure comes from the SEBI (Mutual Funds) Regulations, 1996. SEBI gives final registration only after the sponsor, trust deed, and AMC meet fit and proper standards.
The Securities and Exchange Board of India (SEBI) is the market regulator for mutual funds. SEBI was set up in 1988 and became a statutory body under the SEBI Act, 1992. It is headquartered in Mumbai. SEBI frames scheme categories, disclosure rules, valuation norms, and expense limits. The Association of Mutual Funds in India (AMFI), set up in 1995 and based in Mumbai, works as the industry body for distributors and investor awareness.
What Is the MF Lite Framework?
The MF Lite framework is SEBI’s lighter regulatory route introduced on 31 December 2024 for passive-only mutual funds. It eases sponsor eligibility, net worth and compliance norms for AMCs that offer only index funds, exchange traded funds and other specified passive schemes.
Active funds depend on a manager to pick stocks and time buys and sells. Passive funds simply copy an index. An index fund collects money and buys the same shares in the same weight as its benchmark, like the Nifty 50. An exchange traded fund (ETF) does the same job but trades on the stock exchange through the day like a share. A fund of funds (FoF) invests in another mutual fund instead of buying shares directly.
SEBI felt that rules built for active stock picking were too heavy for such rule based products. The old system applied the same net worth, track record, profitability, and compliance load to both types. MF Lite separates the two. A passive-only entrant gets calibrated entry norms, simpler trustee and board processes, and lighter reporting. Core duties stay. Valuation, daily net asset value (NAV) calculation, portfolio disclosure, and investor grievance handling continue in full.
Phase one covers only defined products. It includes domestic equity index funds and ETFs that track broad indices meeting a collective ₹5,000 crore asset threshold, along with specified government securities, treasury bills, and state development loan based target maturity and constant duration passive funds. It also includes gold ETFs, silver ETFs, and FoFs that invest only in those ETFs. Specified overseas ETFs and FoFs with a single overseas passive underlying can qualify if the benchmark is broad based and standardised. A FoF that invests across more than one index stays outside phase one.
Entry remains regulated. The sponsor must show positive net worth in all of the preceding five years and meet profit and liquid net worth conditions. The MF Lite AMC must maintain net worth of at least ₹75 crore. If the total assets managed by an MF Lite AMC cross ₹1 lakh crore, SEBI requires it to shift to higher net worth and governance standards that apply to regular AMCs.
1 Finance Approval and the Road to Final Registration
1 Finance announced the clearance on 19 October 2026. The company said it will now complete regulatory and operational steps and seek SEBI’s final registration. No scheme has been launched yet. Mutual fund units can be offered to the public only after that final registration is granted. The firm has guided for a launch in the fourth quarter of FY27.
The proposed AMC will offer only passive products such as index funds and ETFs. It cannot use the MF Lite licence to launch active equity, debt, or hybrid schemes. If 1 Finance later wants to run active funds, it must meet the full requirements for a regular mutual fund. The company has not yet disclosed scheme names, benchmarks, or expense ratios.
1 Finance is a personal finance advisory and wealth-tech firm with more than ₹17,000 crore in assets under advice. It operates as an arm of the Marwadi Chandarana Group and is led by founder and managing director Jeet Marwadi and co-founder and chief executive Keval Bhanushali (as of October 2026). The firm is registered with SEBI as a Registered Investment Adviser and runs financial planning centres in Mumbai and Pune. Its stated focus is asset allocation, tax efficiency, and disciplined investing rather than chasing short term returns.
What Does In-Principle Approval Mean?
In-principle approval in SEBI’s mutual fund process is an early clearance that lets an applicant set up systems, premises and staff. It is not the final licence. SEBI grants final registration only after verifying net worth, infrastructure, compliance systems and trustee arrangements.
SEBI simplified this route in August 2026 with a single consolidated application form. The first stage covers the in-principle request by the sponsor to set up the fund. The second stage covers final registration of the trust, the AMC, and the trustee. For 1 Finance, the current approval means SEBI finds the proposal eligible in principle. The company must still lock in capital, appoint key staff, put compliance and risk systems in place, and sign trustee and custodian agreements before schemes can open.
MF Lite Compared With the Regular Mutual Fund Framework
The difference is scope. A regular licence allows both active and passive schemes. An MF Lite licence allows only eligible passive schemes. That narrow scope is the reason SEBI permits lighter entry and operating rules.
| Feature | MF Lite AMC | Regular AMC |
|---|---|---|
| Schemes allowed | Only specified passive schemes such as index funds, ETFs, and eligible FoFs | Both active and passive schemes across equity, debt, and hybrid categories |
| Sponsor and capital norms | Calibrated norms linked to passive-only business, with minimum AMC net worth of ₹75 crore | Full sponsor eligibility, track record, and profitability norms for active business |
| Governance | Focused trustee and board roles suited to index replication | Broader oversight for research, stock selection, and varied strategies |
| Compliance load | Reduced reporting where active fund checks are not relevant | Complete reporting and review cycle for all schemes |
| Growth trigger | Must meet regular AMC standards once assets cross ₹1 lakh crore | Regular standards apply from the start |
| Investor safeguards | Valuation, NAV, disclosure, and grievance rules continue | Same core safeguards apply |
An existing fund house with active schemes does not need a new licence to get some relief. Specified lighter trustee roles can apply only to its qualifying passive schemes. The active business stays under the regular framework.
How Many AMCs Are There in India?
India had 51 mutual fund AMCs in March 2026, up from 43 in March 2022, according to industry data. Total industry assets stood at about ₹82.64 lakh crore at end September 2026, with passive funds holding about ₹14.70 lakh crore of that total.
Scale explains why SEBI created a separate route. Passive assets were ₹10.95 lakh crore at the end of August 2024, or 16.4% of total industry assets of ₹66.7 lakh crore. By February 2026, passive assets had risen to ₹15.24 lakh crore from ₹6.64 lakh crore in February 2023. The mix includes index funds of about ₹3.25 lakh crore, gold ETFs of about ₹1.83 lakh crore, and other ETFs of about ₹9.76 lakh crore.
The industry remains concentrated. The top five AMCs managed 56.2% of assets in March 2026. Large houses include SBI Funds Management, ICICI Prudential AMC, HDFC AMC, Nippon India, Kotak, Axis, Canara Robeco, Mirae Asset, UTI AMC, and WhiteOak Capital. Newer names such as Bajaj Finserv Mutual Fund have also entered in recent years. Average assets reached ₹87.09 lakh crore in September 2026, and total folios had crossed 10 crore back in May 2021, which shows how wide retail participation has become.
Why Passive Funds Matter for Investors
Passive products suit investors who want market returns at low cost without betting on a manager’s calls. An index fund that tracks the Nifty 50 will rise and fall with those 50 shares. The return gap between the fund and the index is called tracking difference. The wobble around that gap is called tracking error. Both depend on fees, cash holdings, and how well the fund handles rebalancing and corporate actions.
Cost still needs close checking. The annual charge on a scheme is the expense ratio. MF Lite may sharpen competition and widen choice, but a new licence does not by itself guarantee a lower expense ratio or better tracking. Investors must compare the exact index, the index method, assets under management, and past tracking record. For ETFs, exchange liquidity matters as well. A thinly traded ETF can quote at a premium or discount to NAV and carry wider bid ask spreads.
Risk does not reduce because a product is passive. Equity indices can fall sharply. Long duration debt indices react to interest rate moves. Gold and silver can swing fast. Overseas index products add currency movement and access limits. 1 Finance says it will focus on simple, transparent, and cost efficient designs linked to financial planning. The claim can be tested only after SEBI grants final registration and the scheme documents disclose benchmarks, fees, and tracking methods.
The Way Forward
The next milestone is SEBI’s final registration. 1 Finance must show that capital, systems, trustees, custodians, and key staff are in place. Only then can it file offer documents for individual index funds and ETFs. Its stated target is the fourth quarter of FY27.
If the launch succeeds, it will test whether a light touch route can bring focused players into passive investing without weakening safeguards. Other wealth-tech firms, private equity backed sponsors, and boutique managers are watching the process. A smooth approval to launch could encourage more applications. Slow progress on tracking quality or ETF liquidity could raise fresh questions.
For the market, the real measure will be simple. Do new MF Lite schemes offer clear benchmarks, tight tracking, fair costs, and easy redemption? The framework has opened the door. Investor outcomes will decide its success.
Key Takeaways
- 1 Finance received in-principle approval from SEBI on 19 October 2026 to set up an AMC under the MF Lite framework.
- The MF Lite framework was introduced on 31 December 2024 for passive-only AMCs offering index funds, ETFs, and eligible FoFs.
- An MF Lite AMC must maintain net worth of at least ₹75 crore and meet regular AMC standards once assets cross ₹1 lakh crore.
- India had 51 mutual fund AMCs in March 2026, with total industry assets of about ₹82.64 lakh crore at end September 2026.
- 1 Finance targets a fund house launch in Q4 FY27, subject to SEBI’s final registration and completion of operational requirements.
