SEBI introduced comprehensive Mutual Fund Rules 2026 replacing the 1996 regulations, effective April 1, 2026. Key changes include mandatory ESG disclosure for equity schemes, reduced expense ratios for passive funds, enhanced investor protection through cooling-off periods, and stricter fund manager qualification norms. New liquid fund regulations limit overnight exposure to 25%. Digital KYC processes streamlined with Aadhaar integration. Asset Management Companies must maintain higher net worth requirements of ₹150 crore.

The SEBI Mutual Fund Rules 2026 represent a paradigm shift toward sustainable investing and enhanced investor protection in India's ₹50 lakh crore mutual fund industry. The ESG mandate addresses global climate commitments while the expense ratio caps on passive funds reflect the growing popularity of index investing. The cooling-off period for systematic plans prevents mis-selling, a persistent industry concern. Stricter fund manager qualifications requiring CFA/FRM certifications aim to professionalize portfolio management. The liquid fund overnight exposure limit addresses systemic risk concerns highlighted during the 2020 credit crisis when Franklin Templeton wound up six schemes. Digital KYC integration with Aadhaar reduces onboarding friction, crucial for achieving the government's financialization targets. Higher AMC net worth requirements create barriers to entry but ensure only well-capitalized players operate. These rules position India's mutual fund sector for institutional maturity while balancing innovation with stability, directly impacting retail participation in capital markets and the broader goal of household financialization.