Mutual Fund Investors to Benefit as SEBI Introduces BER Formula

New Rules for Mutual Funds
Mutual fund investors have received a significant relief as market regulator SEBI has introduced a new way to disclose expenses through the Base Expense Ratio (BER). Under the new system, fund houses will have to separately show management fees and government taxes (GST and STT), giving investors a clear picture of how much of their money is spent on fund management and how much goes to taxes.

Previously, all expenses were combined and shown as the Total Expense Ratio (TER). These new rules will come into effect from 1 April 2026.

Investor Protection and Expense Limits
SEBI has clarified that all mutual fund scheme expenses must be borne by the scheme itself and must stay within a prescribed limit. If a fund’s expenses exceed the SEBI-specified limit, the Asset Management Company (AMC) must cover the extra cost from its own pocket, not the investors’ money. This move is expected to protect investors’ funds and make costs more transparent.

Brokerage Charges Reduced
SEBI has also reduced brokerage charges on stock transactions. For cash market trades, brokerage has been cut from 0.12% to 0.06%, and for derivatives, it has been reduced from 0.05% to 0.02%. Additionally, the 0.05% extra exit load introduced in 2018 has now been removed.

Simplifying Account Opening and KYC
SEBI has proposed measures to simplify the account opening process and strengthen the risk management systems of KYC Registration Agencies (KRAs). Investors’ information will now be centralized, eliminating the need to repeatedly provide the same details to different brokers or institutions.

The regulator has also suggested reducing repeated verification processes. Mobile numbers linked with Aadhaar and updated PAN-Aadhaar details will not require separate verification or documents. Overseas Citizens of India (OCI) residing in India for more than 182 days will not need to provide foreign addresses.

Easier Rules for Foreign Investors
To attract foreign investment, SEBI has simplified regulations under the SWAGAT-FI system. Foreign Portfolio Investors (FPIs) will no longer need to fill separate forms for different categories. The validity of registration and KYC has been increased from 5 years to 10 years. These changes are set to take effect from June 2026.