Mutual funds have become one of the fastest-growing investment avenues in India, but their journey spans several decades — marked by regulatory reforms, new fund houses, technological upgrades, and rising investor awareness.
Here’s a detailed look at how mutual funds evolved in India from 1963 to today.

 The Beginning (1963–1987)

Launch of UTI – The Birth of Mutual Funds in India

• The mutual fund industry in India began in 1963 with the establishment of the Unit Trust of India (UTI).

• UTI was set up by the RBI and Government of India as the first and only mutual fund operator.

• Its flagship scheme, Unit Scheme 1964 (US-64), became extremely popular among households.

Characteristics of this phase:

• Monopoly by UTI

• Limited investment options

• Low investor awareness

• Mutual funds seen as “government-backed savings”

 Entry of Public Sector Mutual Funds (1987–1993)

The next phase opened the market to public sector companies.

Major developments:

• In 1987, public sector banks and financial institutions entered the industry:

  • SBI Mutual Fund

  • Canara Bank Mutual Fund

  • Punjab National Bank Mutual Fund

  • LIC Mutual Fund

  • GIC Mutual Fund

Impact:

• Increased competition

• Wider distribution reach (through banks)

• Slight improvement in investor awareness

 Liberalization and Entry of Private Sector (1993–2003)

Economic reforms in the 1990s transformed the mutual fund industry.

Regulation: SEBI Enters

• In 1993, the SEBI (Mutual Fund) Regulations were introduced.

• For the first time, mutual funds had a clear regulatory framework.

Arrival of Private Players

Domestic and international players entered the Indian market, such as:

• HDFC Mutual Fund

• Franklin Templeton

• ICICI Prudential

• DSP

• Birla Sun Life

• Fidelity

Impact:

• Global investment expertise

• Professional fund management

• Improved transparency

• Introduction of various fund categories (equity, debt, balanced funds)

UTI Crisis (2001–2003)

The collapse of US-64 eroded trust temporarily.

• Government later restructured UTI into UTI Mutual Fund (regulated by SEBI).

Consolidation & Growth (2003–2013)

This decade marked the strengthening of the industry.

Key developments:

• Implementation of SEBI (Mutual Fund) Regulations, 1996

• Introduction of Systematic Investment Plans (SIP)

• Growth of asset management companies (AMCs)

• Expansion of mutual fund distribution channels (banks, IFAs, online platforms)

Impact:

• Rapid rise in retail participation

• Improved investor protection

• Higher transparency and disclosures

Digital Revolution & Massive Retail Adoption (2013–2018)

This period fundamentally changed how Indians invest.

What triggered the boom:

1. Digital platforms (e.g., Zerodha, Groww, Paytm Money) made MF investing easy.

2. Direct Plans introduced in 2013 reduced expense ratios.

3. Launch of KYC norms, e-KYC, and Aadhaar-based onboarding.

4. Growing acceptance of SIP as a stable wealth-creation tool.

5. Aggressive investor education campaigns like “Mutual Funds Sahi Hai.”

Impact:

• Surge in SIP investors

• Higher AUM growth

• Wider geographic penetration

• Increased financial literacy

 Modern Era – Post-2018 to Present

Today, mutual funds are one of the most preferred investment options for Indian households.

Key developments:

• SEBI reclassification (2018) brought uniformity in fund categories
  (large-cap, mid-cap, multi-cap, sectoral, hybrid, etc.)

• Rise of passive investing:

  • Index funds

  • ETFs

  • Fund of funds

• Growth of factor-based/smart-beta funds

• Increasing shift of savings from physical assets (gold, real estate) to financial assets

• Surge in AUM, crossing ₹50 lakh crore by 2024

• SIP inflows reaching record highs month after month

Technological advancements:

• Mobile-based investing

• AI-driven advisory platforms

• Social investing communities

• Improved transparency via digital dashboards and disclosures

Current Trends Shaping the Future

1. Rise of Passive Funds

Low-cost index funds are gaining popularity, especially among young investors.

2. Growing SIP Culture

SIP inflows may surpass ₹25,000 crore per month in the coming years.

3. Tier-2 & Tier-3 Penetration

Small towns are driving a large part of new MF registrations.

4. Hybrid & Dynamic Asset Allocation Funds

These are preferred for goal-based investing.

5. Global Investing

More funds now invest in international markets despite SEBI’s AUM limits.

Conclusion

The evolution of mutual funds in India has been remarkable — from a single UTI scheme in 1964 to a diversified, technology-driven, transparent industry with dozens of AMCs and thousands of schemes. The mutual fund industry is now a cornerstone of India’s financial ecosystem, empowering millions to invest systematically and build long-term wealth.