The Securities and Exchange Board of India has given its approval to a comprehensive restructuring of mutual fund fee regulations — a move that could materially change how investors evaluate, compare, and choose investment schemes.
The decision comes amid rapid growth in India’s mutual fund investor base, with millions of first-time investors entering the market through digital platforms and SIPs.
What Changes for Everyday Investors
One of the most investor-friendly aspects of the new framework is the unbundling of mandatory statutory charges from fund management costs. Until now, many investors struggled to understand what portion of their expenses went toward fund management versus unavoidable regulatory levies.
By separating these elements, SEBI aims to make cost comparisons between schemes simpler and more meaningful — especially for retail investors tracking long-term wealth creation.
Performance-Linked Fees: Optional but Impactful
SEBI has also allowed mutual funds to introduce optional performance-based fee models, a concept that has been debated within the industry for years. Under this approach, fund managers may earn higher fees only when they deliver returns above a defined benchmark.
For investors, this introduces a stronger alignment between outcomes and costs. For fund houses, it raises the bar on consistency, risk management, and portfolio discipline.
Distribution Economics Under Review
The regulator’s rationalisation of brokerage and distribution costs is expected to gradually reshape advisory practices. Digital platforms, direct plans, and technology-led distribution models may gain further traction as cost efficiency becomes a competitive advantage.
While traditional intermediaries may face adjustment pressures, market experts believe the overall ecosystem will benefit from higher trust and improved disclosure standards.
Why This Matters Now
India’s mutual fund industry has matured rapidly, managing assets worth several tens of trillions of rupees. SEBI’s latest intervention reflects a recognition that scale must be matched with stronger governance, clearer communication, and investor-first design.
For retail investors navigating a crowded marketplace of schemes, the new rules could make decision-making more intuitive and outcomes more predictable.
Looking Ahead
Detailed implementation guidelines and timelines are expected in the coming months. As fund houses adapt to the new framework, investors should see clearer factsheets, improved cost disclosures, and potentially more innovation in fee models.
ReviewStreet will continue to decode what these regulatory changes mean for portfolios, platforms, and personal finance decisions.