SEBI Revises Mutual Fund Norms, Fees Likely to Drop Soon

The Securities and Exchange Board of India (SEBI), the market regulator, has proposed revised guidance to rebuild the fee and expense structure of Mutual Funds. The objective is to make mutual fund investing more cost-efficient, transparent and fair for retail investors across India.

According to the draft proposed this week, SEBI plans to simplify how fund houses charge expenses by introducing a more transparent and investor-friendly Total Expense Ratio (TER) system. The new framework focuses on aligning costs with the fund size, investor base and type of mutual fund scheme.

Aim of Lower Costs and Increase Efficiency

Currently, mutual fund houses charge investors under multiple heads, such as management fees, distribution costs and other running expenses.

SEBI now aims to merge and standardize these charges under one clear structure, allowing investors to understand how much they are paying and for what easily.

The move is expected to remove unnecessary costs applied by some Asset Management Companies (AMCs) and encourage healthy competition among them. By cutting down overlapping charges and improving clarity, SEBI hopes to ensure that investors enjoy better returns as more of their money stays invested instead of being deducted through fees.

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What the New Fee Structure Might Include

The proposed framework is expected to introduce stricter limits on fees under the expense ratio. It may link allowable charges to the Assets Under Management (AUM) so that larger funds charge lower TERs, encouraging economies of scale.

SEBI might also prevent fund houses from creating separate charges beyond TER, ensuring simpler, predictable pricing for investors. In addition, funds could be required to disclose expense details more clearly, helping investors compare schemes more easily before investing.

These changes aim at SEBI’s larger goal of promoting transparency, accountability and value for investors.

Why This Is Good News for Mutual Fund Investors

For lakhs of retail investors who depend on mutual funds to build long-term wealth, lower expenses can make a noticeable difference. Even a 0.25% reduction in annual costs can generally increase portfolio returns over a 10–15-year horizon, especially for SIP investors.

The new norms will encourage AMCs to operate efficiently, reduce marketing-driven expenses and focus more on performance growth. Lower TERs and greater visibility into cost breakdowns are key steps toward strengthening investor confidence.

Industry experts have welcomed SEBI’s initiative, noting that this change is timely as the mutual fund industry has experienced a historic breakthrough rise in participation from small investors. With India’s AUM outstanding Rs 60 lakh crore in 2025, clarifying cost structures has become essential to ensure equity and investor trust.

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Future Outlook: Fair Play and Better Returns

Once the final guidelines are released, fund houses will likely need to realign their pricing and expense structures within a fixed, limited period. SEBI is expected to monitor the use closely to ensure uniform compliance.

Investors should expect clearer fund statements, easier plans and potential savings over time. The regulator’s intent is not just to lower costs but also to help investor as a responsible and transparent mutual fund ecosystem that prioritizes investor interests above all.