The Securities and Exchange Board of India (SEBI), vide circulars dated October 6, 2017, and December 4, 2017, had issued guidelines on categorisation and rationalisation of mutual fund schemes. These are aimed at clearly distinguishing the schemes in terms of asset allocation and investment strategy, and ensuring that there is uniformity in the characteristics of similar schemes launched by different mutual funds.

SEBI has indicated that going forward, mutual fund schemes would be broadly classified into five groups (equity, debt, hybrid, solution-oriented, and others), and has prescribed scheme categories under each group along with their characteristics and uniform description.

This has meant modification of the investment objective, investment strategy, and benchmark of each scheme to align them with the standardised scheme categories.

Furthermore, a mutual fund is allowed to float only one scheme under each category (except in the case of a few specific fund types).

In line with these guidelines, mutual funds have submitted their transition proposals to SEBI for approval. Changes recommended by SEBI, if any, will have to be made within three months of approval. Crisil expects this process to be completed by May 31, 2018.

Crisil has credit quality ratings outstanding on 35 debt-oriented mutual fund schemes (see annexure for list). These indicate Crisil's opinion on the credit quality of the debt securities that the fund holds. Crisil understands that some of its rated schemes may undergo a change, including change in nomenclature or fundamental attributes.

Consequently, the underlying credit quality of portfolio holdings in some of the rated funds may also undergo a change. It is also possible that some of the rated schemes may be merged with others.