Sebi Proposes Rs 20,000 Crore AuM Threshold for ‘Significant Indices’

The Securities Exchange Board of India has launched a new framework for the governance of indices. The framework proposed by Sebi seeks to boost transparency and accountability in the administration of ‘significant indices.

As per Sebi’s consultation paper, significant indices refer to those indices that are administered by an Index Provider and benchmarked by domestic mutual fund schemes. However, significant indices will include those indices that have a financial threshold of Rs 20,000 crore in assets under management (AuM).

“Indices administered by an Index Provider, which are tracked or benchmarked by domestic mutual fund schemes with the cumulative assets under management exceeding the limits as may be specified from time to time,” Sebi said in its proposal.

Sebi’s proposal seeks to bring significant indices under its direct supervision to safeguard the integrity of the rapidly growing passive investing market. Following the finalisation of the proposal, index providers of significant indices will have to register with Sebi and adhere to stringent governance standards.

What Has Sebi Proposed?

In the consultation paper, the market regulator has also mentioned that the calculation of the AuM will be done based on the daily average of AuM of domestic mutual fund schemes for each month of the past six months ending on June 30 and December 31 of every year. Additionally, the computation of cumulative AuM will be based on the portion of AuM of such schemes that track each index or benchmark for schemes which track multiple indices or benchmarks. Sebi added that for index of indices, the cumulative AuM tracking such underlying indices will also include the AuM tracking such indices in proportion to their respective weights.

Sebi stated that index providers such as NSE Indices, BSE Index Services, and CRISIL will have to apply for registration within six months of the rules taking effect. Following their registration with the Sebi, they will have to establish an independent oversight committee, implement conflict-of-interest policies, and maintain a robust grievance redressal mechanism.

The market watchdog has identified 47 indices which meet its criteria as per the consultation paper, based on data from the first half of 2025. The list includes the headline indices, Nifty 50, and BSE Sensex, along with other indices such as the Nifty Bank and several debt and hybrid benchmarks.

Why Has Sebi Proposed The Framework

India has witnessed strong investor interest in passive investing, which is indicated by strong AuM growth for index funds and exchange-traded funds (ETFs). The AuM of passive schemes has grown to Rs 14 lakh crore by the end of 2025, compared to Rs 1.9 lakh crore in 2019, indicating a near seven-fold growth. Amid the surge in passive investing the way an index is constructed directly dictates where the investor’s money is going.

The proposal seeks to increase transparency and curb the odds of manipulation. Index providers have the discretion to add or remove stocks from indices based on rules. However, Sebi’s latest proposal seeks greater transparency in the process. The framework aims to ensure that the rules for the addition and exclusion of stocks to indices are transparent and objective.

How Does Sebi’s Framework For Significant Indices Help Mutual Fund Investors

The changes proposed by the Sebi seek to enhance investor protection by adding a formal grievance redressal system for significant indices. Thus, it will allow subscribers of schemes which track significant indices to access a formal grievance redressal system.

“Further, it is clarified that the grievance redressal mechanism under Regulation 23 of the SEBI (Index Provider) Regulations, 2024, shall apply only to Significant Indices provided by the index providers registered with SEBI. Accordingly, subscribers to such Significant Indices shall have recourse to grievance redressal under SEBI (Index Providers) Regulations, 2024,” Sebi said.

Additionally, Sebi’s rule for index providers to make mandatory disclosures is expected to bolster trust as the mandatory disclosures will make it easier for investors to understand the underlying logic deployed by the index to add or remove stocks.

Amid a rise in passive investing, Sebi’s latest proposal aims to increase accountability for index providers to foster trust in the securities market. The capital market regulator has invited public comments on the proposal till February 10, 2026.