New Delhi, Aug. 20 -- The Securities and Exchange Board of India (Sebi) is considering potential limits on the number of passive mutual funds per category, two people aware of the matter said, as a flood of passive funds sweeps across the market.

Such curbs, if introduced, could reduce confusion for retail investors by reducing the number of repetitive passive funds such as index funds and exchange-traded funds. However, the discussions are in early stages and may or may not result in policy action.

"There were discussions around whether the industry could streamline the number of similar strategies. Like, an asset management company (AMC) can have multiple funds all running essentially the same momentum fund, but one with large-caps an...