The Securities and Exchange Board of India (SEBI) on Tuesday, October 28 issued a detailed consultation paper proposing a complete rethink of mutual fund regulations — the first such exercise in nearly three decades. SEBI said the overhaul aims to make mutual funds easier to understand and more transparent for investors, and has invited public feedback on the proposals by November 17, 2025.

Clearer rules, lower costs for investors

A key proposal is to simplify the Total Expense Ratio (TER) framework to make it more transparent and investor-friendly. SEBI has suggested cutting brokerage costs for equity schemes from 12 basis points to just 2 basis points. It has also proposed that statutory charges be excluded from TER and disclosed separately, allowing investors to see exactly how their money is being utilised.
To reduce costs further, fund houses would no longer be allowed to pass new scheme launch expenses to investors. Instead, these would have to be borne by the asset management company (AMC). The regulator has also proposed removing the additional 5 basis points cost currently levied through exit loads.

SEBI has proposed a decisive shift towards a more digital, less paper-driven system for mutual fund communication. Instead, all disclosures from scheme details to performance updates would be made available on their official websites. Annual reports and statements of accounts would be shared with investors through digital channels by default, a move expected to cut paperwork, reduce costs, and make information easier to access.

Officials familiar with the proposals said the intent is to make investor communication quicker, more transparent, and better aligned with how investors consume information today, while also reducing the industry’s environmental footprint.

SEBI is also looking to simplify the mutual fund landscape by removing less-used categories such as capital protection and real-estate schemes. To make compliance easier, investment limits and valuation norms could be brought together in a single master circular, replacing multiple overlapping guidelines issued over the years.

Governance norms are part of the clean-up too. The number of mandatory trustee meetings may be cut from six to four annually, giving trustees more time to focus on oversight quality rather than frequency. The regulator also wants clearer lines of accountability between sponsors, trustees and asset management companies, and has sought views from the industry on whether the current sponsor–trustee–AMC structure needs to be reworked.

To ensure stronger leadership at fund houses, SEBI has suggested introducing minimum experience standards for top executives such as chief executive officers and chief investment officers — a step meant to raise management quality and investor confidence across the sector.