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NISM-Series-V-A: Mutual Fund Distributors · Scheme Related Information

SEBI Scheme Categorisation and Rationalisation for Mutual Funds

Updated 11 October 2026 · Fact-checked

SEBI groups mutual fund schemes into five broad groups: equity, debt, hybrid, solution-oriented and other schemes. Each category has a fixed definition. An AMC can offer only one scheme in each category, with limited exceptions. To solve exam questions, match the scheme's features to the category definition.

Understand Scheme Categorisation and Rationalisation

Before 2017, AMCs launched many similar schemes under different names. Investors could not tell them apart. SEBI's categorisation circular fixed this. Each scheme must fit a defined category with a standard name and a clear investment mandate.

SEBI placed schemes in five groups: equity schemes, debt schemes, hybrid schemes, solution-oriented schemes and other schemes (index funds, ETFs and fund of funds). Each group has several categories. For example, equity has large cap, large and mid cap, mid cap, small cap, multi cap, flexi cap, dividend yield, value, contra, focused, sectoral/thematic and ELSS.

Rationalisation means an AMC should not run several schemes in the same category. As a general rule, an AMC can have only one scheme in each category. Similar schemes had to be merged or repositioned. The rule is not absolute. These are generally allowed as separate schemes:

  • Index funds and ETFs that track different indices.
  • Fund of funds that invest overseas, or that invest in different underlying schemes.
  • Sectoral or thematic funds in different sectors or themes.

This list is not exhaustive. Close-ended schemes such as fixed maturity plans (FMPs) and other cases that SEBI specifies are also treated differently. Different debt categories by duration are separate categories, so they are not duplicates.

There is one more rule to remember for equity. Dividend yield, value and contra are separate categories, but an AMC can offer only one of the three: a value fund, a contra fund or a dividend yield fund. A value fund or a contra fund is permitted only if the AMC does not offer a dividend yield fund, and the reverse also holds.

The category definitions are mostly about minimum allocation to a type of stock or instrument. Large cap funds invest at least 80% of total assets in large cap stocks. Mid cap funds invest at least 65% in mid cap stocks. Small cap funds invest at least 65% in small cap stocks. Large and mid cap funds invest at least 35% each in large cap and mid cap stocks. Multi cap funds invest at least 75% of total assets in equity and equity-related instruments, with at least 25% each in large, mid and small cap stocks. Flexi cap funds invest at least 65% in equity, across any market cap.

Companies are ranked by full market capitalisation, averaged over six months. Large cap means the 1st to 100th company, mid cap means 101st to 250th, and small cap means 251st onwards. AMFI publishes the list half-yearly, as of end-June and end-December. Exams test these percentages and ranks, and which category fits a described scheme.

Key formulas to remember

Market cap classification
Large cap: rank 1–100 | Mid cap: rank 101–250 | Small cap: rank 251 onwards
Ranked by the average of six months' full market capitalisation. AMFI publishes the list half-yearly, as of end-June and end-December.
Large cap fund
Minimum 80% of total assets in large cap stocks
Equity and equity-related instruments of large cap companies.
Mid cap fund
Minimum 65% of total assets in mid cap stocks
Small cap fund has the same 65% minimum, in small cap stocks.
Large and mid cap fund
Minimum 35% in large cap AND minimum 35% in mid cap stocks
Both limbs must be met.
Multi cap fund
Minimum 75% in equity, with at least 25% each in large, mid and small cap
Flexi cap needs only 65% in equity, with no split across caps.
One scheme per category
Generally one scheme per category per AMC, with exceptions
Exceptions include index funds/ETFs on different indices, fund of funds investing overseas or in different underlying schemes, sectoral/thematic funds in different sectors or themes, and close-ended schemes such as FMPs. The list is not exhaustive. An AMC can offer only one of value fund, contra fund or dividend yield fund. A value or contra fund is permitted only if no dividend yield fund is offered, and vice versa.

How to solve Scheme Categorisation and Rationalisation questions

Use this method for any question on categories, definitions or rationalisation.

  1. 1Identify the group first: equity, debt, hybrid, solution-oriented or other.
  2. 2Read the scheme's described feature: asset mix, market cap focus, duration, or purpose.
  3. 3Recall the exact minimum allocation or definition for the matching category.
  4. 4Check numbers carefully: 80%, 65%, 35%, 25% and the rank bands 100 and 250.
  5. 5For rationalisation questions, ask whether the schemes are in the same category. If yes, one per AMC applies unless an exception covers it.
  6. 6Eliminate options that mix up categories, such as giving a mid cap fund an 80% limit.
  7. 7Pick the option that matches both the category name and the number.

Quickest way: Anchor numbers method

When to use it: Use when a question asks for a minimum percentage or which category fits a scheme.

  1. Memorise the anchors: large cap 80, mid and small cap 65, flexi cap 65, large and mid 35 each, multi cap 25 each.
  2. Remember the ranks: 100 and 250.
  3. If the option shows a number, match it to the named category first.
  4. For one-scheme-per-category questions, look for an exception such as index funds or thematic funds. If none applies, the answer is one.

Common mistakes in Scheme Categorisation and Rationalisation

  • Stating 80% as the minimum for mid cap and small cap funds.

    Students carry the large cap number to all caps.

    Fix: Only large cap is 80%. Mid cap and small cap are 65%.

  • Confusing multi cap with flexi cap.

    Both can hold stocks of all sizes.

    Fix: Multi cap must hold at least 25% each in large, mid and small caps. Flexi cap has no fixed split across caps.

  • Thinking an AMC can run two large cap funds.

    Students forget the rationalisation rule.

    Fix: One scheme per category per AMC, except for the stated exceptions.

  • Believing index funds of different indices are duplicates.

    Students over-apply the one-scheme rule.

    Fix: Index funds and ETFs tracking different indices are allowed. Sectoral or thematic funds in different themes are also allowed.

  • Mixing up the rank bands for large, mid and small cap.

    Numbers 100 and 250 are easy to swap.

    Fix: Large is 1–100, mid is 101–250, small is 251 onwards.

Worked examples

Example 1

Under SEBI's categorisation, what is the minimum investment in large cap stocks by a large cap fund, and what does SEBI treat as a large cap company?
A. 65% of total assets; top 50 companies
B. 80% of total assets; top 100 companies
C. 35% of total assets; top 250 companies
D. 75% of total assets; top 150 companies

Show the solution
  1. Recall the large cap fund rule: at least 80% of total assets in large cap stocks.
  2. Recall the definition: large cap means the top 100 companies by full market capitalisation.
  3. Check option A: 65% belongs to mid and small cap funds, and 50 is wrong.
  4. Check option C: 35% applies to large and mid cap funds, and 250 is the mid cap upper rank.
  5. Check option D: 75% belongs to multi cap equity minimum, and 150 is not a SEBI rank band.
  6. Only option B has both correct values.

Answer: B

Example 2

An AMC already has a mid cap fund. It wants to launch a second mid cap fund with a different name. Which statement is correct under SEBI's rationalisation rule?
A. It can launch it, since names differ
B. It can launch it if the fund is open-ended
C. It cannot launch it, as one scheme per category applies
D. It can launch it if the minimum investment is higher

Show the solution
  1. Identify the issue: both schemes are in the mid cap category.
  2. Recall the rule: an AMC may have only one scheme in each category.
  3. Check for exceptions: they cover index funds/ETFs on different indices and sector or thematic funds in different themes. A mid cap fund fits none.
  4. Names, structure or minimum investment do not change the category.
  5. So the second scheme is not allowed.

Answer: C

Exam tips

  • Memorise the allocation numbers as a small table: 80, 65, 65, 35+35, 25+25+25.
  • Questions often swap one number or rank in the wrong options. Check each carefully.
  • Know the exceptions to one scheme per category. They are a favourite trap.
  • Distinguish the five groups first. A question about a fund of funds or index fund belongs to other schemes.
  • Read for words like 'minimum' and 'at least'. The rules are floors, not ceilings.

Practice questions from Scheme Related Information

Scheme Categorisation and Rationalisation: frequently asked questions

What are the main groups in SEBI's scheme categorisation?

There are five: equity, debt, hybrid, solution-oriented and other schemes. Each group has defined categories with standard names and investment mandates.

What is the difference between large cap and mid cap funds under SEBI rules?

A large cap fund invests at least 80% of its assets in the top 100 companies by market capitalisation. A mid cap fund invests at least 65% in companies ranked 101 to 250.

What does rationalisation of schemes mean?

It means an AMC can offer only one scheme in each category. Similar schemes had to be merged or repositioned. Exceptions exist, such as index funds on different indices and thematic funds in different themes.

Who decides which companies are large, mid or small cap?

AMFI publishes the list based on SEBI's rank bands using full market capitalisation. It is updated every six months.