MONEY
SEBI restructures mutual fund expenses, lowers trade cost, brings in more transparency
- IBJ Bureau
- Dec 18, 2025
The Securities and Exchange Board of India (SEBI) has approved a comprehensive overhaul of mutual fund regulations to improve cost transparency and reduce expense burden on investors. These changes will come into effect from April 1, 2025.
In its board meeting on Wednesday, the market regulator has also brought in wide-ranging reforms across stock broking, initial public offers (IPOs), corporate bonds and governance norms.
At the core of the reforms is a revamp of the Total Expense Ratio (TER) framework. Under the revised structure, there will be no TER as such. Instead, TER will be unbundled into three separate components: Base Expense Ratio (BER or management fee, covering cost of fund management, administration, RTA, legal, audit, and marketing), brokerage charges and statutory or regulatory levies.
The market regulator has approved the exclusion of statutory and regulatory levies – including Securities and Commodities Transaction Tax (STT and CTT), GST, Stamp Duty, SEBI’s fees and stock exchanges’ charges – from calculation of TER. These levies will now be charged on actuals over and above the BER, giving investors a clearer picture of fund management costs.
The market regulator has slashed brokerage charges. For equity cash market transactions, mutual funds will be allowed to pay a brokerage of up to 6 basis points (bps), significantly lower than the current levels of up to 12 bps. For derivative transactions undertaken by mutual funds, brokerage caps have been revised to 2 bps from the current 5 bps, excluding statutory levies.
The SEBI has also removed the additional 5-bps expense allowance that was earlier linked to exit loads.
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