The Indian mutual fund industry, though still small in comparison to the size of the Indian economy, offers Indian, and in some cases global investors, both big and small, an avenue to invest safely and securely, at a reduced cost, in a diverse range of securities, spread across a wide range of industries and sectors.
History of Mutual Funds in India== The first Indian mutual fund was set up in 1963, when the Government of India created the Unit Trust of India (UTI). Until 1987, UTI enjoyed a monopoly in the Indian mutual fund market and sold a range of mutual funds through a network of financial intermediaries. At the end of 1988 UTI had Rs. 6,700 crores of assets under management. In 1987, the Government of India permitted public sector banks and the Life Insurance Corporation of India (LIC) and General Insurance Corporation of India (GIC) to enter the mutual fund industry. The State Bank of India's SBI Mutual Fund was the first such mutual fund to be established in 1987. Canara Bank set up Canbank Mutual Fund shortly after in the same year, followed by funds from Punjab National Bank and Indian Bank in 1989, Bank of India in 1990 and Bank of Baroda in 1992. The LIC established its mutual fund in 1989 and the GIC in 1990. At the end of 1993, the mutual fund industry had assets under management of Rs. 47,004 crores. in 1993, with the creation of SEBI and better regulation, transparency and liberalisation of capital markets (which included the creation of the NSE and the NSDL), the private sector was allowed to enter the mutual fund industry. Kothari Pioneer Mutual Fund (now merged into Franklin Templeton Investments) was the first private sector mutual fund to be registered in July 1993. In the following years, international giants in the industry as well as Indian corporates and industrial families setting up their own mutual funds, purchasing existing fund companies or merging with them. At the end of January 2003, there were 33 mutual funds with assets totalling Rs. 1,21,805 crores. The UTI still led the pack with Rs. 44,541 crores worth of assets. In February 2003, faced with financial mismanagement, opaque bookkeeping and huge, growing liabilities at the UTI, the Government of India suspended redemptions, guaranteed the assets, unveiled a comprehensive suite of reforms and repealed the Unit Trust of India Act 1963. The UTI was split into two parts. One was called the "Specified Undertaking of the Unit Trust of India" with Rs. 29,835 crores of assets largely belonging to the UTI's Unit 64 fund. The fund was rumoured to own property, commodities and a whole range of unconventional and often undocumented assets. The fund would attract millions of investors by promising generous annual dividends that were far in excess of the returns on its actual portfolio. This Specified Undertaking of Unit Trust of India, functioned under an administrator appointed by Government of India, outside of SEBI's purview, until it was eventually liquidated in 2008. The Government asked the SBI, PNB, BOB and LIC to step in as sponsors of the second part, now called UTI Mutual Fund (in addition to being sponsors of their own mutual funds) under SEBI's regulation. As of 30 June 2013, the Indian mutual fund industry manages assets worth approximately Rs.847,000 crores.page 4
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