Regulator SEBI is re-examining the mutual fund fee structure with a focus on improving cost efficiency for investors, a move that also aligns with broader reforms linked to IPO disclosures and market transparency. The proposal is expected to be discussed at an upcoming SEBI board meeting.
India’s mutual fund industry has grown rapidly over the years, managing assets worth several lakh crore rupees. As investor participation increases—especially through IPO-related investments and equity-linked schemes—the regulator believes there is a need to reassess whether existing fee structures remain fair and efficient.
Why Mutual Fund Fees Are Under Review
SEBI is concerned that higher expenses, including Total Expense Ratios (TER) and brokerage costs, can significantly reduce long-term investor returns. With markets expanding and IPO activity drawing more retail investors into mutual funds, lowering costs has become a priority to ensure better value delivery.
The review will look at:
- Rationalising expense ratios across fund categories
- Reducing brokerage and transaction-related costs
- Improving transparency so investors clearly understand what they are paying
Link to IPO and Market Reforms
The fee review is part of a larger regulatory effort that includes simplifying IPO-related disclosures and strengthening investor protection. As more investors enter the market through IPOs and mutual fund routes, SEBI aims to make the ecosystem more efficient, transparent and investor-friendly.
Lower costs could also improve fund performance visibility, helping investors make better decisions when allocating money to IPO-focused or equity-oriented schemes.
What This Means for Investors
If approved, the changes could:
- Reduce the cost burden on mutual fund investors
- Improve net returns over the long term
- Encourage wider participation in equity markets and IPO-linked investments
Final decisions will depend on SEBI’s board approval and subsequent implementation guidelines, but the intent is clear: enhancing investor outcomes while maintaining market integrity.
