The Securities and Exchange Board of India (SEBI) has proposed a series of changes to the regulatory framework governing Portfolio Management Services (PMS), including the introduction of a dedicated Mutual Fund-only Portfolio Management Service (MF-PMS) category.
In a consultation paper released on Thursday, the capital markets regulator outlined proposed amendments to the SEBI (Portfolio Managers) Regulations, 2020, aimed at expanding investment opportunities, simplifying compliance requirements and making the portfolio management industry more accessible.
“The objective of this consultation paper is to seek comments and views from the public on the proposed amendments to the SEBI (Portfolio Managers) Regulations, 2020 (“PM Regulations”) and circulars issued thereunder, carried out pursuant to a comprehensive review,” SEBI said.
PMS Industry Records Strong Growth
SEBI highlighted the rapid expansion of the Portfolio Management Services industry over the past few years.
According to the regulator:
- Assets Under Management (AUM) increased to Rs 42.61 lakh crore as of May 31, 2026, from Rs 18.07 lakh crore in April 2019.
- The number of PMS clients rose to 2.19 lakh from 1.5 lakh during the same period.
- The number of registered portfolio managers more than doubled to 515 as of May 31, 2026, compared with 226 in 2020, when the PMS regulations were last comprehensively revised.
SEBI said the industry’s rapid growth, greater use of technology and increasing demand for customised investment solutions prompted a comprehensive review of the existing regulatory framework.
Proposal for Mutual Fund-Only PMS
One of the key proposals is the creation of a separate Mutual Fund-only PMS registration category. Under the proposed framework, portfolio managers would be allowed to manage client funds exclusively through direct plans of mutual fund schemes, including exchange-traded funds (ETFs) and specialised investment funds (SIFs).
Currently, portfolio managers can invest clients’ money in mutual funds alongside other eligible securities. “Under the PM Regulations, portfolio managers are permitted to invest client’s funds in units of Mutual Funds along with other permissible securities. Based on representation and requests received from industry stakeholders, there is a recognized demand for a simplified ‘Mutual Fund-only’ PMS framework with lowered entry barriers,” SEBI said.
Lower Entry Barriers Proposed
To encourage wider participation, SEBI has proposed reducing the minimum investment required from clients.
Under the proposal:
- The minimum client investment would be reduced from Rs 50 lakh to Rs 25 lakh.
- The minimum net worth requirement for applicants seeking registration as portfolio managers would be lowered from Rs 5 crore to Rs 2 crore.
The regulator has also proposed allowing existing portfolio managers to offer MF-PMS under a separate investment approach.
Cap on Management Fees
SEBI has proposed introducing a ceiling on fixed management fees charged under the new MF-PMS framework. According to the consultation paper, portfolio managers operating under the proposed category would be allowed to charge a fixed management fee of up to 2.5 percent of a client’s Assets Under Management (AUM).
The regulator has invited comments from the public on the proposed amendments before finalising the revised framework.
