11.8         ndian    onom
               (e) professional service, and               firms and lenders. A fund house will be allowed to
               (f) low cost for all the benefits.          have only one scheme per category to ensure that
          An investor, by investing in a mutual fund       there is no duplication.
     scheme that has blue chip stocks in its portfolio,
     indirectly gets an exposure to these stocks.             dFHI
     Compared to this, if the same investor wants to
     have each of these stocks in his portfolio, the cost  The Discount and Finance House of India
     of buying and managing the portfolio will be          Limited13 (DFHI) was set up in April 1988 by
     much higher.                                          the RBI jointly with the public sector banks and
          Mutual funds invest the investors money in       financial investment institutions (i.e., LIC, GIC
     both the loan and share markets. Buyers of MF         and UTI). Its establishment was an outcome of
     units are given choice/option as in which of the      the long-drawn need of the following two types:
     markets they wish their money to be invested by             (i) to bring an equilibirium of liquidity in
     the fund managers of the MF. This way investors                   the Indian banking system and
     get the following choices:
                                                               (ii) to impart liquidity to the instruments
          (i) Loan (100 per cent of the funds will be                  of the money market prevalent in the
               invested in the loan market),                           economy.
         (ii) Share (100 per cent of the funds will be
                                                                In 2004, the RBI transferred its total holding
               invested in the share market), and
                                                           in the DFHI to the State Bank of India arm
        (iii) Balance (60 per cent of the funds will
                                                           SBI Gilts Limited. Its new name is SBI DFHI.
               be invested in the loan market while the
                                                           It functions as the biggest ‘primary dealer’ in the
               rest 40 per cent in the share market—
                                                           economy and functions on commercial basis. It
               this provision keeps changing depending
               upon the health of the share market—        deals in all kinds of instruments in the money
               clearly announced by the MFs).              market without any upper ceiling. Operating in
          By October 2017, the SEBI (Securities            ‘two way’ (as a lender and borrower) its objective
     and Exchange Board of India) announced to             is to provide needful liquidity and stability in the
     classify the mutual fund schemes into five broad      financial market of the country.
     categories to cut through the clutter and make it       13.     t was in       that the Chore Committee for the first
     easier for investors to compare plans with similar             time recommended for a discount house to level
     characteristics—Debt, Equity, Hybrid, Solution-                the liquidity im alances in the an ing system. he
                                                                    government ecame active after the recommendations
     oriented (such as retirement and children funds),              of the Working Group on the Money Market (i.e., the
     and other schemes.                                               aghul Committee,         and finally esta lished H
          Every class is further finely divided, making             in 1988. The Vaghul Committee suggested to set up a
                                                                    discount finance institution which could deal in short
     for a total of 36 different scheme categories such as          term money market instruments so that liquidity could
     Dividend Yield Equity Fund, which would focus                    e provided to these instruments. he committee also
     on dividend-yielding stocks, or Banking and PSU                recommended the house to operate on commercial
                                                                      asis , which was accepted y the government while
     Debt Fund, which invests a minimum 80 per cent                 setting up DFHI.
     of its corpus in debt paper issued by state-owned