The Securities and Exchange Board of India (SEBI) approved key revisions to mutual fund regulations during its board meeting on December 17, 2025, introducing a uniform total expense ratio (TER) structure across schemes and imposing caps on broking and transaction costs. The changes, aimed at enhancing transparency and reducing overall costs for investors, mark a significant overhaul to promote fairness and efficiency in the rapidly growing mutual fund industry.

SEBI has mandated a single TER framework based solely on assets under management (AUM), eliminating additional slabs previously allowed for inflows from beyond the top 30 cities (B30) or retail investors. This simplifies charging mechanisms while ensuring larger schemes benefit from economies of scale, with lower TER for higher AUM brackets passed directly to unit holders.

Broking and transaction costs, excluding GST and securities transaction tax (STT), will now be capped at actuals or a maximum of 10 basis points for cash equities and 5 basis points for derivatives, whichever is lower. The regulator has also prohibited market makers or brokers from receiving payments from asset management companies (AMCs) for distribution or execution, curbing potential conflicts of interest.

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Additional measures include allowing AMCs to charge up to 5 basis points for schemes with inflows from women investors to promote financial inclusion and permitting up to 30 basis points extra TER for exits within specified periods to discourage short-term redemptions. SEBI emphasised that these reforms prioritise investor protection by aligning costs with genuine expenses. The mutual fund sector, managing over ₹70 lakh crore in AUM as of late 2025, has seen explosive growth driven by retail participation. Industry stakeholders welcomed the transparency push, though some expressed concerns over potential impacts on distribution incentives in smaller cities.

Implementation timelines will be detailed in forthcoming circulars, with AMCs required to comply progressively. Investors are expected to benefit from lower effective costs and clearer fee structures in the long term. These revisions underscore SEBI's ongoing efforts to foster a more investor-centric ecosystem, building on previous reforms while addressing evolving market dynamics.

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