SEBI (Mutual Funds) Regulations, 2026 highlights: Lower expense ratios, revised brokerage limits

The SEBI Board on Wednesday, December 17, 2025, approved the SEBI (Mutual Funds) Regulations, 2026, which will replace the SEBI (Mutual Funds) Regulations, 1996.

According to the regulator, the revised mutual fund regulations are designed to offer stakeholders “greater clarity, improved readability, and enhanced structural coherence.”

However, the new rules have retained the “core principles, safeguards, and regulatory intent built over the years.” The revised regulations also aim to further strengthen investor protection, transparency, and governance standards within the mutual fund ecosystem.

Key highlights of SEBI (Mutual Funds) Regulations, 2026

The capital markets regulator issued a press release on Wednesday, sharing the following key features of the new regulations:

One of the major components of the new regulation is the revision of the expense ratio framework. The Total Expense Ratio of a scheme will be the sum of BER, brokerage, regulatory levies, and statutory levies.

Key features of the revised expense ratio framework are the following:

• Expense ratio limits will now be called Base Expense Ratio (BER) and it will exclude all statutory levies.

• Statutory and regulatory levies such as STT/CTT, GST, Stamp Duty, SEBI Fees, Exchange Fees, etc., incurred for execution of trades will be charged on actuals, over and above permissible brokerage limits.

• Total Expense Ratio = BER + Brokerage + Regulatory levies + Statutory levies.

The revised base expense ratio limits are as indicated below:

Other highlights of the revised regulations

The revised regulations have streamlined eligibility criteria for sponsors of Mutual Funds and Mutual Fund Lite. The roles and responsibilities of AMCs and Trustees have been reorganised under common thematic headings for greater clarity. The provisions related to the prudential investment limits and valuation of securities for consolidation have also been reorganised.

The new regulations have rationalised the brokerage limits for mutual funds:

The revised regulations have removed the additional 5 bps currently permitted to be charged to schemes with exit loads as a transitory measure.

Chapters on Real Estate Mutual Funds and Infrastructure Debt Fund schemes have been removed as separate frameworks for such products already exist.

As a result of the review of the mutual fund regulations, there has been a 44% reduction in the size of the regulations from 162 pages to 88 pages.

“The word count has been reduced by approximately 54%, from 67,000 words (including footnotes) in the current regulations to 31,000 words in the new draft. Further, the number of provisos have been reduced from 59 to fewer than 15 and all ‘notwithstanding’ clauses have been eliminated, except for its limited use under the ‘Repeal and savings’ provision. This restructuring is expected to improve readability and ease regulatory compliance,” SEBI said.