On December 17, 2025, the Securities and Exchange Board of India (SEBI) approved a major overhaul of the mutual fund fee structure, marking a significant regulatory shift in India’s capital markets. The decision, taken at a board meeting chaired by SEBI Chairman Tuhin Kanta Pandey, aims to increase transparency in mutual fund costs and reduce the overall expense burden for investors, while also modernizing capital market regulations for asset management companies (AMCs) and brokers.

Key Changes in Mutual Fund Fee Structure

Under the new framework, mutual funds must now break down all components of their charges, giving investors a clear view of management fees, brokerage, statutory levies, and other expenses. This step eliminates hidden costs and enables easier comparison across funds, promoting informed investment decisions.

The Base Expense Ratio (BER) has been introduced, which excludes GST, Securities Transaction Tax (STT), and other statutory levies, allowing investors to understand operational costs separately from taxes. The traditional Total Expense Ratio (TER) will now be the sum of BER + brokerage + regulatory levies + statutory levies, enhancing mutual fund fee transparency.

SEBI also revised brokerage caps. For equity cash market trades, the cap is set at 6 basis points (bps), up from the initially proposed 2 bps but down from the prior 12 bps. For derivative trades, the cap is 2 bps, reduced from 5 bps. These adjustments aim to balance cost efficiency and manager flexibility in executing trades.

Additionally, SEBI removed a 5-bps exit load fee, effective April 1, 2026, making redemptions more investor-friendly and improving liquidity. These moves are expected to reduce average mutual fund charges by 10–15 bps, benefiting retail and institutional investors alike.

Other Regulatory Reforms

Alongside the fee revamp, SEBI approved multiple reforms to modernize India’s capital markets:

- Stockbroking updates: Over 30-year-old regulations for brokers were revised for clarity and transparency, impacting firms like Angel One and Nuvama.

- IPO disclosures: A concise summary of key information replaces the abridged prospectus, aiding investor understanding.

- Pre-IPO lock-in rules: Lock-ins now continue even if pledged shares are released, streamlining issuer operations.

- Debt market incentives: Special provisions introduced for retail investors, women, and senior citizens.

- Credit ratings for unlisted debt: Agencies can rate unlisted securities with proper risk management.

However, the conflict of interest framework for senior SEBI officials was deferred for further deliberation, reflecting operational complexities.

Market Impact

The regulatory updates had an immediate effect on AMC and broking stocks. Shares of Canara Robeco AMC surged 8.5%, HDFC AMC rose 4.5%, Nippon Life AMC gained 6%, and UTI AMC jumped 4%, while the broader Nifty Capital Markets Index climbed 2%. Investors reacted positively to clearer cost structures and perceived benefits for profitability and transparency.

Why This Matters

The SEBI reforms aim to:

- Enhance mutual fund transparency, separating operational costs from statutory charges.

- Reduce overall investor expenses.

- Modernize rules for brokers and asset managers, ensuring fair market practices.

- Encourage broader participation in debt and equity markets.

The balanced approach is designed to improve investor confidence, protect retail participants, and maintain AMC sustainability without drastic compression of margins.