SEBI’s expense ratio tweak to have limited impact on mutual fund profits: SBI MF’s DP Singh

The Securities and Exchange Board of India’s (SEBI) latest changes to mutual fund expense rules are less damaging than initially feared, with the final impact on fund house profitability expected to be limited, according to market participants. Both Amisha Vora, Chairperson and Managing Director of PL Capital and DP Singh, Deputy Managing Director and Joint CEO of SBI MF, said the regulator’s decision to cut the base expense ratio by 10 basis points—rather than the earlier proposed 15 basis points—has eased concerns and brought much-needed clarity to the industry.

Singh said the regulator listened to industry feedback and applied the reduction in a more balanced manner. He credited SEBI for understanding the cost structure and said the market’s positive reaction reflects relief that the hit is manageable.

He acknowledged that profitability will be affected by the removal of the five basis points earlier linked to exit loads, but said rising market volumes and assets under management should help offset the impact. “The volumes will make up for this,” he said, adding that the overall effect is “not very high.”

Vora agreed that the regulatory outcome is better than expected but flagged concerns for the institutional broking industry. She said the cap on brokerage fees at six basis points could pressure broker earnings, especially if large mutual funds continue paying lower rates. However, she added that if fund houses uniformly pay the permitted six basis points, the damage would be contained, and research coverage would remain viable as more companies and IPOs enter the market.

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Singh emphasised that SEBI’s broader objective is transparency and protecting unit holders, not preserving margins for intermediaries. He said keeping brokerage and levies outside the base expense ratio makes costs clearer, especially as taxes and charges can change over time. While acknowledging the adjustment required on both sides, Singh said the growing size of India’s capital markets should support the ecosystem. “We are here for the unit holders,” he said, expressing confidence that higher participation and volumes will keep the industry profitable.

Also Read: SEBI’s new mutual fund rules a ‘mixed bag’, may hurt research quality: Sandeep Parekh

Looking ahead, Vora said 2026 is likely to be a period of adjustment for the broking industry. With brokerage yields under pressure and compliance and research costs rising, firms will need to focus on gaining market share and expanding coverage. She cautioned that it may take a year or two for brokers to fully absorb the impact of the new rules, even as mutual funds and capital markets continue to grow.

For the entire interview, watch the accompanying video

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