The capital markets regulator Securities and Exchange Board of India has clarified that family trusts cannot be sponsors of mutual funds.

Responding to a clarification sought by First Water Capital Advisory LLP, SEBI said the mutual fund regulations have made it clear that the sponsor of a mutual fund should be a body corporate acting individually or in concert with another body corporate for establishing mutual funds or mutual fund lite.

“Since a family trust is not a body corporate, it cannot be a sponsor of a mutual fund,” it said in its guidance in the form of an interpretive letter.

The capital advisory firm also had a query on whether a sponsor can apply for a mutual fund licence under Route-2 by contributing a net worth of ₹150 crore, with ₹50 crore as equity share capital and ₹100 crore as preference shares redeemable only after the asset management company achieves profits for five consecutive years.

However, SEBI did not respond to the query as it was not related to policy concerns.

Published on April 21, 2026