AMFI Asks SEBI Not to Reduce TER of Mutual Fund Schemes

The Association of Mutual Funds in India (AMFI) has asked the market regulator to keep the current total expense ratio (TER) structure unchanged for mutual fund schemes. As per the news reports, the request was placed in response to SEBI’s consultation proposal that seeks comments from the public. 

Proposal to Cut Fund Charges 

SEBI has suggested lowering the cost of mutual fund investments by reducing TER by 15 basis points across equity schemes. If the proposal is accepted, the maximum TER for equity funds with assets below ₹500 crore would fall from 2.25% to 2.10%. Debt funds in the same category would have their upper limit brought down to 1.85%. 

Uniform Reduction Raises Concerns 

Industry reports have pointed out that the same reduction is being proposed for all fund sizes. Many large equity schemes already work with lower fee levels, with rates close to 1.05%. They believe smaller funds may absorb a cut more easily than larger ones that already operate at a lower fee range, making a uniform reduction difficult to manage. 

Impact on Fund Houses and Distributors 

According to news reports, a cut of 15 bps on bigger schemes could affect both AMCs and distributors. Margins in mutual funds are described as narrow, and any correction in the market could increase pressure on operating costs. The concern is that lowering TER further may restrict what fund houses can spend on operations and distribution. 

Brokerage Cap  

Apart from TER changes, SEBI has proposed reducing permissible brokerage paid to stock brokers from 12 basis points to 2 basis points. AMFI has asked for a revision of this limit to 5 bps instead of 2 bps. 

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Conclusion 

The consultation remains open for public feedback until November 24, 2025. AMFI has asked the regulator to review the proposed reductions and consider the practical costs involved before finalising the rules. 

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