The Securities and Exchange Board of India has cleared wide-ranging set of changes for the mutual fund industry and stock brokers, which includes simplifying rules and also reducing the expense ratio, a move that will reduce costs for investors as well as ease compliance.
“The new SEBI (Mutual Funds) Regulations, 2026, are designed to offer stakeholders greater clarity, improved readability, and enhanced structural coherence. While simplifying compliance, the revised framework retains the core principles, safeguards, and regulatory intent built over the years, and further strengthens investor protection, transparency, and governance standards within the mutual fund ecosystem,” the market regulator said.
One of the emphasis has been on clearer structure and simplified language, consolidation of related provisions and removal of overlapping clauses.
It has streamlined eligibility criteria for sponsors of mutual funds, reorganised roles and responsibilities of AMCs and Trustees under common thematic headings for greater clarity and reorganised provisions related to the prudential investment limits and valuation of securities for consolidation and ready reference.
SEBI has also brought in major changes related to statutory levies. Expense ratio limits will now be called base expense ratio and it will exclude statutory and regulatory levies like GST, stamp duty, SEBI fees etc.
SEBI has also revised base expense ratio limits. For instance, for index funds and exchange traded funds, it has been reduced from current 1 per cent (including statutory levies) to 0.90 per cent (excluding levies).
For open-ended equity schemes, the base expense limit has been revised by 10-15 bps.
The base expense limit has been reduced as the assets under management (AUM) increase.
SEBI also announced rationalisation of brokerage limits and removal of additional expense allowance, which were transitory.
The new regulatory framework also aims to simplify operational and compliance requirements through rationalisation of reporting requirements and elimination of duplicate filings. The borrowing framework has also been streamlined such as enabling borrowing by equity-oriented index funds and equity-oriented ETFs for execution-related needs, and clarifying the permissibility of intra-day borrowing mechanisms to manage redemption-related timing mismatches.
Redundant chapters and clauses too have been deleted and the regulator says this exercise has resulted in 44 per cent reduction in size of regulations.
The SEBI board also approved amendments to streamline certain requirements related to public issues to enhance ease of doing business and increase the engagement and participation of retail investors.
Furthermore to enhance participation of retail investors in corporate debt market and also to encourage public issuances in the debt market, the SEBI board approved a proposal for amending regulations to permit debt issuers to offer incentives to certain categories of investors.