India plans a major mutual fund overhaul with new rules to strengthen oversight and reduce investor costs
New mutual fund rules take effect April 1, 2026, replacing old framework
SEBI approved the overhaul on December 17, aiming for transparency, accountability and stronger investor protection
India’s mutual fund rulebook is set for a major reset after the market regulator rolled out a new set of regulations aimed at tightening oversight and cutting unnecessary costs for investors.
The new rules will come into force from April 1, 2026 and will replace the current mutual fund framework. Officials see the move as a reset of the regulatory approach, especially in how schemes are monitored and governed.
SEBI signed off on the overhaul during its board meeting on December 17. The regulator has signalled that it wants stronger transparency, clearer accountability and a sharper focus on investor protection across the mutual fund industry.
1 January 2026
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A major change under the new framework relates to how schemes charge investors. SEBI has drawn a clear line on what expenses can be passed on under the Total Expense Ratio.
How Will It Help Investors?
Only specified costs will now be allowed. These include the base expense ratio, limited brokerage and transaction-related costs, statutory levies and exit loads. Any expense outside this list will have to be borne by the asset management company, trustees or sponsors and cannot be charged to investors.
The rules also make it clear that transaction costs linked to trade execution will stay outside the base expense ratio. This is expected to make cost disclosures simpler and help investors better understand what they are paying for.
Trustees and independent directors will see closer scrutiny under the new rules. They will now review investment management agreements, compensation plans and any service deals with related parties.
They are expected to report problems and follow up until issues are resolved. Annual reports will carry detailed comments from trustees on scheme performance, including past performance data and clear expense information. Asset management companies will also provide digital copies of scheme-wise reports to investors on time.
Why Fund Houses Should Worry?
Fund houses could feel the strain under the new rules. With limits on what costs can be passed to investors, they may have to pay more themselves.
Trustees will need to watch funds more closely, and reporting will be stricter. While this might affect profits at first, experts say it could help build trust with investors over time.
