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How SEBI's new proposal will boost your mutual fund investment returns

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By Sangeeta Ojha

4 min read | Updated on October 30, 2025, 16:08 IST

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SUMMARY

The Securities and Exchange Board of India (SEBI) has proposed lowering the maximum Total Expense Ratio (TER) that a mutual fund scheme can charge

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SEBI has proposed lowering the maximum Total Expense Ratio (TER) that a mutual fund scheme can charge. | Image: Shutterstock

Investing in mutual funds has long been a popular way for individuals to grow their wealth, but one factor that can eat into their returns is the cost of investing.

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From fund management fees to transaction charges, these expenses can quietly reduce their profits over time.

Now, the Securities and Exchange Board of India (SEBI) has proposed lowering the maximum Total Expense Ratio (TER) that a mutual fund scheme can charge. This means that the ongoing fees you pay to the fund for management and administration will likely fall.

Here is a closer look at how it could benefit you as an investor

When you invest in a mutual fund, you pay a fee known as TER, which typically covers fund management expenses. In addition to TER, mutual funds are also allowed to pay brokerage fees for buying and selling securities.

To protect the interest of investors and to ensure that expenses are charged fairly only once to the investors, the brokerage charge has been revised from 12 bps to 2 bps for cash market transactions and from 5 bps to 1 bps for derivative transactions, to bring clarity and transparency, the regulator proposed.

This move is expected to lower the overall cost of investing in mutual funds, which is good news for investors.

"This is going to be a great move for MF investors if it gets implemented post suggestions received by the industry on the consultation paper. The TER cut will gradually show up in the marginal increase in their ROIs of MF investments. Whether it is an old fund or a new fund with higher or lower AUM, irrespective of that, it will get to witness this benefit," said Ronak Morjaria, Partner at ValueCurve Financial Services.

Also, for the NFOs, the launch costs need to be borne by the AMC / sponsor and should not be charged to the scheme, added Ronak.

What is ROI, and how to calculate it

Return on investment ( ROI), shows how much profit you have made on your investment relative to the cost. It’s expressed as a percentage. For example:

ROI = (Final Value of Investment – Initial Investment) ÷ Initial Investment × 100

So if you invested ₹50,000 and after 3 years it grew to ₹65,000, your ROI = (₹65,000 – ₹50,000) ÷ ₹50,000 × 100 = 30%.

Deepak Shenoy of Capitalmind Mutual Fund posted on social media platform X, “I think this is a good move for investors. Most of you pay a lot less in brokerage today and it's time that we who manage mutual funds also reduce our transaction costs.”

PTI quoted Sandeep Bagla, CEO of TRUST Mutual Fund, who commented on the likely impact of SEBI's proposed changes: "On a net basis, the TER (Total Expense Ratio) should be reduced for the investor. Investors will benefit as their returns will go up."

When will these changes take effect?

The proposals are in the consultation draft stage, so they are not yet finalised. SEBI has invited public comments on the proposals until November 17.

What is the expected benefit for your investment returns?

Even a reduction of 0.15%–0.25% in annual fees matters. For example, on an investment of ₹10 lakh, a 0.15% fee cut means ₹1,500 saved per year. Over many years, these savings compound and add up.

In the Consultation Paper on Comprehensive Review of the SEBI (Mutual Funds) Regulations, 1996, the market regulator also said that a provision enabling expense ratio to be charged based on the performance of a scheme has been introduced, and the same would be voluntary for AMCs.

A detailed framework in this regard shall be finalised separately in consultation with stakeholders, SEBI said.

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Disclaimer: This article is written purely for informational purposes and should not be considered investment advice from Upstox. Investors should do their own research or consult a registered financial advisor before making investment decisions.
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About The Author

sangeeta-ojha.webp
Sangeeta Ojha is a business and finance journalist with vast experience across leading media platforms, including Mint and India Today. Passionate about personal finance, she has built a reputation for covering a wide range of PF topics—from income tax and mutual funds to insurance, savings, and investing.

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