A major boost has come for Indian investors, with SEBI approving radical reforms to cut mutual fund expenses and relax regulations in the broking industry. The reforms, scheduled to go into effect from April 2026, are a part of SEBI’s efforts to make the capital markets more transparent and investor-friendly.
SEBI has introduced a Base Expense Ratio (BER) structure for mutual funds that excludes statutory charges such as Securities Transaction Tax (STT), Goods and Services Tax (GST), and Stamp Duty.
These charges will be imposed separately on actuals, giving investors clearer insight into the actual costs they pay. As per these modified regulations, the limits imposed on the expenses ratio have been reduced across all categories.
For example, closed-ended equity funds have a BER limit slashed to 1% from 1.25%, while index funds and ETFs are subject to a 0.9% limit, down from 1%. The extra five basis points provided as a relief regarding exit loads has also been withdrawn.
Mutual fund trade restrictions imposed by brokerages have been reduced by half, and the fees for trading in the cash and derivatives segments have been restricted. A maximum of 6 and 2 basis points, respectively, down from a maximum of 12 and 12 basis points earlier.
This does not include any statutory fees that would reduce the cost of the transaction for investors.
The regulator has updated the rules for brokers by replacing ‘aged’ clauses with a more streamlined system. SEBI has also made IPO filing easier, improved trading norms for ETFs, and taken steps to make debt markets more accessible to a wider group of investors.
Those reforms will provide greater transparency into mutual fund fees, enabling investors to compare offers better. Although the new rules mean that fund managers will have to adapt to lower expense ratios, market analysts also consider them an improvement for improving efficiency in Indian capital markets.
On the whole, the latest SEBI reform is generally a positive development for retail investors, who benefit significantly from reduced costs, greater clarity, and easier access to the markets.