SEBI cuts Active Equity funds expense ratio now ranges
between 0.95% and 2.10%
The
expense ratio of fixed income mutual funds has also been reduced and now ranges
between 1.85% and 0.70%.
SEBI has reduced the expense ratio in mutual funds
by up to 15 bps. However, the majority of AUM slabs will see an expense ratio
cut of 10 bps.
SEBI board meeting
The decision was made during the SEBI board meeting
held today in Mumbai at December 17, 2025.
With this, the highest TER for open-ended equity
funds with an AUM of less than Rs.500 crore has been reduced from 2.25% to
2.10%, while the highest TER for debt funds with assets of less than Rs.500
crore has come down to 1.85%.
Base Expense Ratio: BER..!
The expense ratio is the cost that a mutual fund
charges its investors to manage a scheme. The market regulator has also renamed
the total expense ratio (TER) as the base expense ratio (BER).
SEBI has excluded external taxes and charges from
the purview of TER (now BER), such as Goods and Services Tax (GST), stamp duty,
Securities Transaction Tax (STT), Commodity Transaction Tax (CTT) and other
statutory fees like SEBI fees and exchange fees.
Overall, BER will include fund-specific levies like
management fees, distribution brokerage and RTA fees, while TER includes
everything — both BER and external fees and taxes.
While the TER cut looks steep, the actual impact
will be clear after the disclosure of the TER investors will pay to fund
houses.
Let us look at the new base expense ratio of mutual
funds based on their AUM:
|
AUM Slab (in crore) |
Existing
TER for Equity schemes |
New BER
for equity schemes |
Existing
TER for Non- Equity schemes |
New BER
for non-equity schemes |
|
Up to Rs.500
crore |
2.25% |
2.10% |
2.00% |
1.85% |
|
Rs.500-Rs.750
crore |
2% |
1.90% |
1.75% |
1.65% |
|
Rs.750-Rs.2000
crore |
1.75% |
1.60% |
1.50% |
1.40% |
|
Rs.2000-Rs.5000
crore |
1.60% |
1.50% |
1.35% |
1.25% |
|
Rs.5000-Rs.10000
crore |
1.50% |
1.40% |
1.25% |
1.15% |
|
Rs.10000-Rs.15000
crore |
1.45% |
1.35% |
1.20% |
1.10% |
|
Rs.15000-Rs.20000
crore |
1.40% |
1.30% |
1.15% |
1.05% |
|
Rs.20000-Rs.25000
crore |
1.35% |
1.25% |
1.10% |
1.00% |
|
Rs.25000-Rs.30000
crore |
1.30% |
1.20% |
1.05% |
0.95% |
|
Rs.30000-Rs.35000
crore |
1.25% |
1.15% |
1.00% |
0.90% |
|
Rs.350000-Rs.40000
crore |
1.20% |
1.10% |
0.95% |
0.85% |
|
Rs.40000-Rs.45000
crore |
1.15% |
1.05% |
0.90% |
0.80% |
|
Rs.45000-Rs.50000
crore |
1.10% |
1.00% |
0.85% |
0.75% |
|
Over Rs.50000
crore |
1.05% |
0.95% |
0.80% |
0.70% |
Source:
SEBI
Other major decisions related to MF BER:
- SEBI
has reduced the BER of passive funds like index funds and ETFs from 1% to
0.90%, irrespective of the asset class.
- The
BER of close-ended equity funds and debt funds has been reduced to 1% and
0.80%, respectively.
- Other
FoFs can charge BER of up to: Index FoFs
0.90%, Equity FoFs 2.10%, and other FoFs 1.85%.
- AMCs
will no longer charge 5 bps in lieu of exit loads.
Other key decisions not directly related to MF BER:
- AMCs
have to reorganise the roles and responsibilities of AMCs and trustees.
- AMCs
are not required to publish information about scheme changes in newspapers
but must disclose such information on their websites.
- SEBI
has discontinued real estate funds, as no fund house has launched any so
far.
- AMCs
can send both the annual report and its abridged summary to investors in a
digital format.
