SEBI is proposing some sweeping changes for Mutual Funds and it’s something every investor should know about.
SEBI has released a consultation paper aiming to overhaul how fund houses charge fees in India’s ₹75 lakh crore Mutual Fund industry. The goal is make costs simpler and more transparent for everyday investors.
Let’s break down the changes-
𝗟𝗼𝘄𝗲𝗿 𝗧𝗿𝗮𝗻𝘀𝗮𝗰𝘁𝗶𝗼𝗻 𝗖𝗼𝘀𝘁𝘀
- Every time your mutual fund buys or sells shares, a small brokerage is paid and that cost eventually comes out of your pocket.
- SEBI now wants to cap these costs sharply:
For equity trades: from 0.12% to 0.02%
For derivatives: from 0.05% to 0.01%
- Example: On ₹1 lakh worth of stocks, brokerage will drop from ₹120 to just ₹20!
𝗧𝗿𝗮𝗻𝘀𝗽𝗮𝗿𝗲𝗻𝘁 𝗘𝘅𝗽𝗲𝗻𝘀𝗲 𝗕𝗿𝗲𝗮𝗸𝗱𝗼𝘄𝗻
-Right now, all costs — STT, GST and Stamp Duty all are bundled into one number called the Total Expense Ratio (TER).
- SEBI wants AMCs to show each component separately so investors can see exactly what they’re paying for.
- Think of it like getting an per item bill instead of a lump-sum restaurant charge.
𝗟𝗼𝘄𝗲𝗿 𝗢𝘃𝗲𝗿𝗮𝗹𝗹 𝗘𝘅𝗽𝗲𝗻𝘀𝗲 𝗟𝗶𝗺𝗶𝘁𝘀
- SEBI also plans to reduce the maximum expense ratio mutual funds can charge, especially for larger schemes that manage more money.
- Logic is bigger funds have lower costs per investor, so savings should be passed on to you.
𝗡𝗼 𝗠𝗼𝗿𝗲 “𝗘𝘅𝘁𝗿𝗮” 𝟬.𝟬𝟱% 𝗔𝗠𝗖 𝗖𝗵𝗮𝗿𝗴𝗲𝘀
- Currently, fund houses can charge an additional 0.05% (5 basis points) over your normal expense ratio.
- SEBI wants to remove this extra charge altogether.
- This may sound small but over years, it means more money stays invested for you instead of going to the AMC.
𝗟𝗶𝗻𝗸𝗶𝗻𝗴 𝗙𝗲𝗲𝘀 𝘁𝗼 𝗙𝘂𝗻𝗱 𝗣𝗲𝗿𝗳𝗼𝗿𝗺𝗮𝗻𝗰𝗲
- SEBI is exploring a performance-linked expense ratio model where AMCs could charge slightly more only if the fund performs better than its benchmark.
- There is a very simple idea behind this : You win, they win. You lose, they earn less.
𝗪𝗵𝗮𝘁 𝗧𝗵𝗶𝘀 𝗠𝗲𝗮𝗻𝘀?
- Mutual funds may soon become cheaper and easier to understand.
- No more hidden costs.
- Clearer transparency on where your money goes.
- Margins may shrink for AMCs & distributors but for long term the impact would not be much.
SEBI’s consultation is open till November 17, 2025, so these aren’t final yet. These reforms align India’s mutual fund structure with global best practices, fostering a more investor-centric ecosystem.