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SEBI approved changes to mutual fund total expense ratio calculation and brokerage limits
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TER will include base expense ratio, brokerage, regulatory and statutory levies now
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Brokerage expense ratio caps reduced for various fund categories including index funds
The Securities and Exchange Board of India (SEBI) in its board meeting on Wednesday approved significant changes to the calculation of the total expense ratio for mutual funds and rationalised brokerage limits for market transactions.
The regulator emphasised that these changes aim to enhance transparency and reduce costs for investors. The expense ratio will now exclude all statutory levies, such as STT, GST and stamp duty.
In addition, SEBI rationalised brokerage caps for both cash and derivative market transactions. For cash market transactions, the existing cap of 12 basis points, which included statutory levies, has been revised to 6 bps, exclusive of levies, down from 8.59 bps net of levies.
It was in October that SEBI had proposed these series of changes to the way mutual funds are managed, introducing measures to cut brokerage costs, enhance transparency on fees and simplify how investors are charged.
In the consultation paper reviewing the 1996 Mutual Fund Regulations, SEBI had outlined the plan to tighten cost structures for asset management companies with the aim of passing on benefits to investors.
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