The Securities and Exchange Board of India (SEBI) has suggested lowering total expense ratios (TER) by up to 0.15% for open-ended mutual funds and up to 0.25% for closed-end schemes. The regulator also said fees must clearly exclude brokerage, taxes and other transaction costs, and their break-up must be disclosed upfront.
This represents a shift from SEBI’s 2023 framework that tried to include such charges within the overall expense ratio. That earlier approach drew pushback from asset managers overseeing ₹75.61 trillion ($860.23 billion) in investor assets.
Brokerage fee caps have also been proposed to be sharply reduced. Cash market brokerage would be limited to 2 basis points from the existing 12 basis points, while derivative transactions would see a cut from 5 basis points to 1 basis point.
SEBI said asset managers may opt for a performance-linked differential fee structure. It also proposed ring-fencing mutual fund operations by requiring fund houses to run any non-MF businesses through separate units, with complete segregation of key employees.
Analysts said the move could weigh slightly on AMC stock sentiment, though it strengthens governance and transparency for investors.