Scheme Reclassification is SEBI's process of formally changing a mutual fund's category — typically following regulatory mandate changes or when a fund's investment strategy evolves to match a different SEBI category.
Following SEBI's 2017 scheme categorisation circular, many AMCs had to restructure their fund offerings to fit into SEBI-defined categories. When a scheme's mandate changes significantly — e.g., a 'diversified equity fund' being reclassified as a 'flexi cap fund' or a 'midcap fund' — it's a reclassification event. Investors are notified, given an exit window (typically 30 days) without exit load, and the scheme's new investment mandate is communicated. The scheme continues with its history but operates under the new SEBI category mandate going forward.
Think of reclassification as a restaurant changing its cuisine — same kitchen, different menu. A fund that was labelled 'diversified equity' might become a 'flexi cap fund' after SEBI mandated specific category definitions. The fund house changes the investment mandate to fit the new category label. As an investor, you get a 30-day window to exit without exit load if you don't like the new mandate. If you stay, your fund operates under new rules.
AMC proposes reclassification to trustees and SEBI.
Investors are notified via email/SMS with the new mandate details.
Exit window: typically 30 days to redeem without exit load.
After effective date: fund operates under new SEBI category mandate.
Historical returns remain but may not be comparable post-reclassification.