Mahindra Finance applied for a mutual fund license in December 2008 and was given an in-principle approval on 4 October 2011, SEBI reported in its website.
It is currently in the process of bringing together its team, product portfolio and strategy for market entry, which will be announced in due course.
Mahindra Mutual Fund managing director and CEO Ashutosh Bishnoi said that the business will continue to focus on the same markets where Mahindra Finance is currently focused.
Mahindra Group financial services sector president and managing director of Mahindra Finance Ramesh Iyer said: "In keeping with our Mission of "Transforming rural Lives", we believe that the Mutual Fund business would enable us to provide investment options to the rural customers that enable them to improve the quality of their lives by creative innovative products that are tailored to their needs.
"Our customer base of nearly 4million and over 1200 branches of Mahindra Finance will play a critical role in ensuring success in the mutual fund business through best in class customer service."
Mahindra Finance executive director and the chairman of Mahindra Asset Management V. Ravi said: "We will adopt a developmental approach and build the mutual fund market in smaller towns and rural India.
"Investments products are a subject of ‘advised sales’ and require the support of trained advisors. We believe there is a great opportunity to convert physical assets, which are generally illiquid into productive, financial assets."
Bishnoi added: "The semi-urban and rural markets will remain the priority for the Mahindra Mutual Fund. We believe that investors in these markets have an even greater savings potential than urban markets, but they do not have either the access or awareness of market related financial instruments such as mutual funds."
