The watchdog said funds performing poorly over a long period need to answer not just to unit holders, but also to the regulator.
"It is a cause of concern. There are at least nine fund houses' schemes which have underperformed and some of them since their launch. These schemes have failed to match returns of their benchmark index.
"Sebi is considering questioning CEOs and fund managers of the mutual funds which have non-performing schemes over a long-term basis," Sebi Chairman U K Sinha told reporters on the sidelines of a CII summit on MF here.
He added Sebi will ask them what measures they are taking to address the issue.
Fund houses have welcomed Sebi's decision to quiz heads of the fund houses for non-performance saying it will increase their accountability.
"I think this is a welcome step. It should lead to accountability on the part of fund houses for non-performance and will also encourage them to perform better," HDFC Asset Management Company managing director Milind Barve said.
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A CII-PWC report on mutual funds also pointed out that there is a proliferation of mutual fund schemes.
"Overlapping schemes may be analysed and the possibility of merging overlapping schemes or discontinuing such schemes with a less than optimal AUM size could be evaluated without prejudicing investors' interest," the report said.
Sinha also said the regulator will inspect AMCs (asset management companies) to ensure there was no violation of rules with regard to the fund objectives. Every MF scheme has a stated investment objective and they are supposed to invest accordingly.
The regulator is also in the process of formalising regulations for investment advisors, said Sinha, a former Chairman and Managing Director of UTI Mutual Fund.