The proposed combo product of insurance and mutual funds (MFs) has hit a roadblock, with several industry players opposing it due to concerns over complexity and operational challenges.
Industry Pushback Halts Progress
The idea was under discussion by the Securities and Exchange Board of India’s (Sebi) MF advisory committee, which includes officials from mutual funds, related businesses, and institutions. However, an industry official familiar with the talks revealed:
“The matter is most likely shelved. MF products should remain ‘true-to-the-label’ investment vehicles. Additionally, the claim processing burden would add complexity for fund houses and distributors.”
The combo product concept isn’t new—until June 2022, a handful of such offerings existed before Sebi imposed a ban on them.
Origin of the Proposal
Former Sebi Chairperson Madhabi Puri Buch revived discussions on re-allowing combo products in January 2025. The objective was to offer a more attractive, accessible investment alternative to expand mutual fund penetration in India, which remains concentrated in top cities.
Despite record-breaking growth, the MF industry still trails behind other investment options in terms of reach. To address this, Sebi has introduced several initiatives, including reducing the minimum investment threshold from ₹500 to ₹250.
Regulatory Uncertainty
In February 2025, Buch mentioned that the Association of Mutual Funds in India (Amfi) had submitted recommendations and that the proposal was still under review.
“We operate through consultations. The MF advisory committee has requested more data, and the matter will be revisited in the next meeting,” Buch stated.
However, with Buch’s tenure ending on February 28 and Tuhin Kanta Pandey taking over as Sebi chairman, the future of the combo product remains uncertain.
Industry Doubts Under New Leadership
A senior MF industry official noted:
“The combo product was a pet project of Buch. With a change in leadership, its prospects could be impacted.”
Under Buch’s leadership, the MF sector saw fast-track regulatory reforms and bold initiatives. Whether the new Sebi chairman will pursue or abandon the combo product remains to be seen.