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 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 and foster innovation.
Passive funds seek to replicate the performance of an underlying index rather than rely on a fund manager to select securities in an attempt to outperform the market. Index funds and ETFs are common examples.
However, not every passive investment product automatically qualifies under MF Lite. SEBI has specified eligible categories and conditions under the framework, including rules governing the indices that schemes can track.
How could MF Lite affect the mutual fund industry?
The framework creates a separate regulatory route for eligible passive-only fund businesses. By easing certain entry and compliance requirements, it could make the segment more accessible to new asset managers and encourage competition with established fund houses.
For investors, greater competition could expand the choice of index funds and ETFs and potentially put pressure on costs. However, lower expenses or improved returns are not guaranteed simply because more fund houses enter the market.
Investors will still need to compare expense ratios, the underlying index, tracking error and, for , liquidity and trading costs. Passive funds also carry market risk because their performance is linked to the securities or indices they track.
1 Finance plans to integrate investing with financial advice
1 Finance said its proposed AMC would complement its existing personal finance advisory business by bringing financial planning and investment solutions together. The company intends to focus on low-cost, diversified and rules-based investment products.
“For us, financial planning and investing are deeply interconnected,” said Jeet Marwadi, co-founder and managing director of 1 Finance. He said the proposed business would focus on asset allocation, tax efficiency and disciplined investing rather than chasing market returns.
Keval Bhanushali, chief executive and co-founder of 1 Finance, said the company aims to build simple, transparent and cost-efficient investment solutions aligned with investors’ long-term financial goals.
The company has not announced the specific schemes it plans to launch or their expense ratios. Its proposed launch in the fourth quarter of FY27 remains subject to final regulatory approval.
For now, the in-principle approval marks an initial step towards setting up the fund house. Investors will have to wait for the final registration and details of individual schemes to assess how 1 Finance’s proposed offerings compare with existing passive funds.