In a circular issued on February 26, the Securities and Exchange Board of India stated that the new framework supersedes its circulars dated October 6, 2025, and November 6, 2025, on scheme categorisation. The revised norms apply to all mutual funds, asset management companies, trustee companies, and the Association of Mutual Funds in India.

SEBI confirmed that mutual fund schemes will continue to be classified into five groups: equity schemes, debt schemes, hybrid schemes, life cycle funds, and other schemes. The “other schemes” category includes funds of funds and passive products such as index funds and exchange-traded funds.

The regulator clarified that the “residual portion” of a scheme refers to the part of the corpus not invested in the core asset classes defined under the scheme’s characteristics.

Defined Minimum Allocation For Equity Schemes

Under the updated structure, SEBI has prescribed minimum investment thresholds within equity categories along with standardised descriptions.

A multi-cap fund is required to allocate a minimum of 75% of its total assets to stocks and other equity-linked instruments.  A minimum of 25% of the 75% is required to be allocated for large-cap, mid-cap, and small-cap stocks. The plan is called an open-ended equity scheme that puts money into stocks of all sizes, including large, mid, and small-cap stocks.

A large-cap fund must invest at least 80% of total assets in equity and equity-related instruments of large-cap companies and is described as an open-ended equity scheme predominantly investing in large-cap stocks.

A large and mid-cap fund must invest a minimum of 35% each in large-cap and mid-cap stocks and is described as an open-ended equity scheme investing in both segments.

Applicability And Structure

SEBI stated in the February 26 circular that the revised categorisation framework is aimed at ensuring consistency in scheme structure and description across fund houses while retaining clearly defined investment boundaries.

The October 6, 2025, and November 6, 2025, rules on how to categorise schemes are no longer in effect because of the February 26 circular. All mutual fund schemes will now follow the new classification rules.