In the context of the Indian financial system, which of the following regulatory bodies is primarily responsible for regulating and supervising Mutual Funds in India to protect investors and ensure fair market practices?

Introduction / Context:
Mutual funds are important investment vehicles in India, allowing retail and institutional investors to pool money and invest in diversified portfolios of securities. Because mutual funds handle public money, there must be a strong regulatory framework to safeguard investors and maintain market integrity. This question tests your knowledge of which statutory body in India is primarily responsible for regulating mutual funds and framing rules for their operation.

Given Data / Assumptions:

• The question is specifically about mutual funds operating in India.
• We need to identify the body that regulates and supervises mutual funds.
• Options include SEBI, RBI, AMFI, and NABARD.
• Only one of these is the main statutory regulator of the mutual fund industry.

Concept / Approach:
The Securities and Exchange Board of India, commonly known as SEBI, is the capital market regulator of India. It regulates securities markets, stock exchanges, listed companies, and collective investment schemes, including mutual funds. The Reserve Bank of India deals mainly with monetary policy and banking regulation. AMFI is an industry association of mutual fund companies, not a statutory regulator. NABARD focuses on agriculture and rural development finance. Therefore, we need to connect the function of regulating securities and investor protection with SEBI in order to answer correctly.

Step-by-Step Solution:
Step 1: Identify that mutual funds are part of the securities and capital market ecosystem and not part of core banking or agricultural finance. Step 2: Recall that SEBI was established as the regulator of securities markets in India with powers to protect investors and ensure fair market practices. Step 3: Note that SEBI issues regulations for mutual fund registration, disclosure norms, advertising, valuation, fees, and investor grievance redressal. Step 4: Recognise that RBI regulates banks and monetary policy, NABARD focuses on rural credit, and AMFI is only an industry body that supports but does not regulate mutual funds. Step 5: Conclude that the primary regulator of mutual funds in India is the Securities and Exchange Board of India.

Verification / Alternative check:
You can double check this by recalling that every mutual fund scheme document mentions that the scheme is registered with SEBI and operates under SEBI (Mutual Funds) Regulations. Investor complaints regarding mutual funds are also escalated through SEBI's grievance redressal mechanisms. AMFI codes of conduct are important but they operate under the umbrella of SEBI regulations, confirming that SEBI is the main regulatory authority.

Why Other Options Are Wrong:
RBI regulates banks, non banking finance companies and payment systems but not mutual fund schemes as such. AMFI represents mutual fund houses, conducts awareness programmes, and issues best practice guidelines but does not have statutory enforcement powers. NABARD is specialised in agricultural and rural development finance, and does not regulate securities or mutual funds. Hence, these bodies are not the primary mutual fund regulator in India.

Common Pitfalls:
A common confusion arises between SEBI and AMFI because AMFI is closely associated with mutual funds. Some learners mistakenly think AMFI is the regulator. Another pitfall is to assume that RBI regulates all financial products, which is not correct. Remembering the division of roles, with SEBI for capital markets and mutual funds, RBI for banking and monetary policy, and NABARD for rural credit, helps avoid these errors.

Final Answer:
The body that regulates mutual funds in India is the Securities and Exchange Board of India (SEBI).