Sebi approves new rules to widen investment avenues
GS3Economy · S&T · Environment · Security· Capital markets & SEBI· Prelims + Mains·
Capital market regulation and asset allocation: a GS3 topic on financial inclusion and investment frameworks.
Why in news
Sebi introduced the PRIM route to allow portfolio managers to invest client funds in mutual fund direct plans and other diverse assets to broaden investment avenues.
Background
The PRIM route allows investments in mutual fund direct plans (including ETFs and index funds) with a minimum ticket size of ₹25 lakh. Management fees are capped at 1% of AUM, and investments in IPOs, primary debt, and foreign securities are limited to 10% of client AUM.
Facts for Prelims
- BodySebi: The regulatory body for the securities and capital markets in India
- FactMinimum ticket size for PRIM route: ₹25 lakh
- FactManagement fee cap: 1% of Assets Under Management (AUM)
- FactInvestment limit for IPOs, primary debt, and foreign securities: Up to 10% of client AUM
Prelims practice question
What is the maximum management fee cap allowed under the new PRIM route rules?
- (a)0.5% of AUM
- (b)5% of AUM
- (c)2% of AUM
- (d)1% of AUM
Show answer
Answer: (d) 1% of AUM — The management fees for the PRIM route are capped at 1% of Assets Under Management (AUM).
For Mains
Q. Discuss how the expansion of investment avenues through regulated frameworks like the PRIM route can enhance retail investor participation in India's capital markets.
Dimensions to cover in your answer
- Market depth: Diversification into ETFs and index funds reducing concentration risk
- Regulatory oversight: Balancing investor protection with the expansion of investment horizons
- Cost efficiency: Impact of the 1% AUM fee cap on the profitability of portfolio management firms
Keywords: Capital Market Regulation · Asset Allocation · Portfolio Management · Retail Participation · Financial Inclusion
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This note is generated automatically from SatyaDheesh's news feed and mapped to the UPSC CSE syllabus. Check facts against the original report or PIB before using them in an answer.