SEBI Proposes Sweeping Fee Structure Reforms For Mutual Funds
The Securities and Exchange Board of India (SEBI) has proposed major changes in the mutual fund industry to bring more transparency and reduce investor costs. A new consultation paper suggests that statutory levies such as Securities Transaction Tax (STT), Goods & Services Tax (GST), Stamp Duty and other charges be excluded from the Total Expense Ratio (TER) limits disclosed to investors.
Key Elements Of The Proposal
SEBI has also recommended excluding brokerage and regulatory fees from TER, with fund houses required to clearly list all cost components. Additionally, the paper introduces an optional performance-based TER model, which would let asset management companies (AMCs) charge variable fees depending on scheme performance.
Impact On Investors And Industry
The reforms could lower headline TERs, making mutual funds more affordable for retail investors. At the same time, SEBI has suggested stricter caps on brokerage costs in both cash and derivatives segments to prevent hidden charges.
Outlook Ahead
The regulator has invited feedback from industry stakeholders before finalising the rules. SEBI stressed that while cutting costs is essential, reforms must balance affordability with investor protection and quality of fund management.
