The Securities and Exchange Board of India (Sebi) on Wednesday relaxed the profitability criteria for the sponsors of mutual funds apart from ringfencing the assets and liabilities of mutual fund schemes. The market regulator also did away with the minimum promoters’ contribution and the subsequent lock-in requirements for issuers making a a follow-on public offering (FPO).

These decisions were taken at its board meeting on Wednesday. It also approved new shareholding norms for listed entities who go through the corporate insolvency resolution process (CIRP).

In a bid to facilitate innovation and expansion in the mutual fund sector, Sebi eased the rules with regard to the eligibility of a sponsor who wishes to set up a mutual fund.

It said that entities that are not fulfilling the profitability criteria at the time of making an application will also be eligible to sponsor a mutual fund.

At present, sponsors have to meet various requirements. The entity should have a clean track record. It should show profit after depreciation, interest and tax in three out of the immediately preceding five years, including the fifth year. Sebi has now relaxed this requirement of having profits.