SEBI’s 2025 Move Could Cut Mutual Fund Costs by 80%, 8 Points

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Your Mutual Fund Fees May Drop by 80% Under SEBI’s New Rules | SEBI Targets ₹75 Lakh Crore Mutual Fund Sector with Cost-Cut Reforms

1️⃣ Mutual Fund Boom in Numbers

• Massive Growth: Industry Assets Under Management (AUM) surged from ₹12 lakh crore (2014) to ₹75 lakh crore (2024) — a 6X rise in just a decade.

• Investor Base: Over 25 crore mutual fund accounts across India, reflecting strong retail participation.

2️⃣ What Made Mutual Funds Grow

• Regulatory Push (2012):

  • SEBI incentivised AMCs to expand beyond top 15 cities.

  • Allowed a 30 bps (0.3%) TER hike for funds attracting rural investors.

• Distributor Benefits:

  • Easier NISM certification boosted local agent recruitment.

3️⃣ Understanding TER (Total Expense Ratio)

• Definition: The annual cost investors pay for fund management.

• Components:

  • AMC management fees

  • Administration & staff costs

  • Distribution commissions

4️⃣ Hidden Costs Beyond TER

• Additional Charges: AMCs levied GST, brokerage, exit-load, and transaction fees.

• Investor Impact: True costs often exceeded disclosed TER, reducing actual returns.

5️⃣ SEBI’s Findings: Time for Change

• Outdated Rules: Some norms unchanged since 1996, despite a multi-fold industry expansion.

• Transparency Gap: Investors couldn’t clearly see where their money went.

6️⃣ SEBI’s 2025 Draft Reform Highlights (Released: Oct 28, 2025)

a. Exit Load Restructuring

• Previously used to pay distributors — no longer allowed.

• Retained only for small-sized schemes:

  • Slab 1: Up to ₹500 crore AUM

  • Slab 2: ₹500 crore – ₹2,000 crore AUM

• Add-on cut: From 0.2% → 0.05%; now scrapped for larger schemes.

b. Brokerage Cost Slash (Up to 80% Cut!)

• Arbitrage funds showed true costs (1.18–1.34 bps), revealing excess charges in other equity schemes.

c. Clear Cost Breakdowns

• AMCs must now disclose each charge separately — GST, STT, stamp duty, CTT, and regulatory fees.

• Investors get full visibility of fund expenses.

d. Redefined TER

• TER now includes brokerage, exchange, regulatory, and statutory levies.

e. Optional Performance-Linked TER

• AMCs may adjust TER based on fund performance:

  • Higher performance = higher fee

  • Underperformance = lower fee

• Currently optional and open for feedback till Nov 17, 2025.

7️⃣ What It Means for Stakeholders

For Investors

• Lower costs and greater transparency.

• Better understanding of how each rupee is spent.

• Encourages long-term participation with lower expense drag.

For AMCs

• Margin pressure: Reduced brokerage allowances.

• Higher compliance clarity but tighter cost control needed.

For SEBI

• Goal: Modernize a 30-year-old rulebook.

• Objective: Build an investor-first, performance-based mutual fund ecosystem.

8️⃣ The Financial Impact Summary

Conclusion

SEBI’s proposed overhaul could mark a historic cost correction in India’s ₹75 lakh crore mutual fund industry.
If implemented, investors could save up to 80% in transaction-related fees and enjoy unprecedented cost transparency — a game-changer for India’s rapidly expanding retail investor base.

Disclaimer

This article is for informational purposes only and does not constitute financial advice. Mutual fund investments are subject to market risks. Readers are advised to consult their financial advisors before making investment decisions. The Profit India assumes no responsibility for any losses arising from investment actions based on this content.

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