Discover SEBI’s 2025 Mutual Fund Reforms, See How You’ll Save More

Published on 31 October 2025 by
SEBI

SEBI Reforms: In a bold stride toward simplifying India’s mutual fund landscape, the Securities and Exchange Board of India (SEBI) has unveiled a comprehensive proposal to restructure the mutual fund fee system starting in 2025. This new framework seeks to bring greater transparency, curb excessive costs, and foster a fairer environment for investors while ensuring that fund houses operate with heightened accountability and efficiency.

The initiative reflects SEBI’s ongoing mission to strengthen investor confidence and align the industry’s growth with long-term sustainability and trust.

A Closer Look at SEBI Reforms New Fee Framework

SEBI’s proposed guidelines are not just about reducing numbers they are about redefining how costs are communicated and justified to investors. The regulator aims to simplify expense structures, eliminate hidden charges, and encourage a performance-based approach to fund management. Here are the key structural changes under consideration:

  1. Reduction in Total Expense Ratio (TER)
    SEBI plans to reduce TER for open-ended equity schemes by approximately 15 basis points. This means investors will pay less in management and administrative fees, directly improving their take-home returns.
  2. Exclusion of Statutory Levies from TER
    To ensure clearer cost segregation, statutory levies such as GST, STT, and stamp duty will no longer be included under the TER cap. This allows investors to clearly differentiate between fund management costs and government-imposed taxes.
  3. Removal of Additional Expense Provision
    The extra 5 basis points currently permitted for Asset Management Companies (AMCs) as an additional charge may soon be scrapped, further reducing investor burden.
  4. Reduction in Brokerage and Transaction Costs
    SEBI intends to slash brokerage fees — from 12 basis points to 2 for cash market trades, and from 5 to 1 for derivative transactions. This move aims to make fund operations more cost-efficient.
  5. Introduction of Performance-Linked Fees
    A progressive step in the proposal allows AMCs to charge slightly higher fees for funds that outperform their benchmarks. This performance-based model, however, will be governed by strict disclosure and transparency norms.
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Why SEBI’s Move Is Significant?

These reforms go beyond numerical adjustments — they reshape the relationship between investors and fund managers. By ensuring fee fairness and transparent reporting, SEBI is laying the groundwork for a more investor-centric ecosystem. Here’s why these changes hold importance:

  • Investor-Centric Costing: Investors will benefit from direct cost savings and reduced hidden charges.
  • Simplified Comparison: A uniform structure enables easier cross-comparison between funds.
  • Clearer Disclosures: Investors will see precisely where their money goes fund management versus taxes.
  • Enhanced Accountability: Fund houses are encouraged to perform better, as higher fees must now be performance-backed.

Expected Impact of SEBI Reforms on Investors

These proposals are crafted to put investors’ interests first. The effects will ripple through the mutual fund landscape, making investing simpler, fairer, and more rewarding. Here’s what investors can expect:

  • Lower Investment Costs: Reduced TERs translate directly into better net returns over time.
  • Simplified Fund Selection: Transparent pricing helps investors make better-informed choices.
  • Greater Fee Clarity: Clear separation of statutory and operational costs eliminates confusion.
  • Performance Recognition: Fund managers will be rewarded for consistent outperformance, aligning their goals with investor success.
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Investor Action Points

While SEBI’s proposal is still under review and expected to be finalized later in 2025, investors can start preparing to adapt to the evolving landscape. A proactive approach will help maximize benefits from these upcoming changes. Here’s what you should focus on:

  1. Review Your Mutual Fund Portfolio: Check your fund’s TER and compare it with SEBI’s new proposed limits once published.
  2. Understand Performance-Based Fees: Know how and when these fees will apply before investing in such schemes.
  3. Stay Informed: Follow SEBI’s consultation updates and public disclosures as the framework gets refined.
  4. Think Long-Term: Even minor reductions in annual costs can significantly boost returns due to compounding benefits.

A Step Toward a More Transparent Future

SEBI’s proposed mutual fund fee reforms mark a pivotal turning point for India’s investment industry. By aligning fees with performance, cutting redundant costs, and emphasizing clarity, SEBI is steering the mutual fund sector toward greater accountability and trust.

For millions of retail investors, this initiative represents not just lower costs — but a stronger foundation for long-term wealth creation and a fairer, more transparent financial future.

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Frequently Asked Questions (FAQs)

1. When will SEBI’s new mutual fund fee structure be implemented?
The proposal is currently under consultation and is expected to be finalized and implemented by the end of 2025.

2. How will the reduction in TER affect my investment returns?
A lower Total Expense Ratio means less is deducted from your investment each year, directly improving your overall returns over time.

3. What are performance-linked fees, and how do they work?
Under SEBI’s proposal, Asset Management Companies may charge slightly higher fees for funds that outperform their benchmarks, provided these charges are disclosed transparently and justified by performance.

4. Will these changes apply to all types of mutual funds?
Initially, the major revisions — such as TER reductions and performance-linked fees — are expected to apply primarily to open-ended equity mutual funds, but SEBI may later extend them to other categories.

5. What should investors do right now?
Investors should review their current fund expense ratios, stay updated on SEBI’s announcements, and be prepared to reassess their portfolios once the final guidelines are in place.