The Proposal
SEBI has released a consultation paper suggesting a steeper slab structure for total expense ratios (TERs), particularly for larger equity funds. Under the proposed framework, funds managing over ₹50,000 crore would see their maximum TER capped at 0.85%, down from the current 1.05%.
Impact on Direct vs Regular
The proposal is primarily aimed at regular plans, where distributor commissions are embedded in the TER. Direct plan investors are already at significantly lower expense ratios. If implemented, this could accelerate the shift toward direct plans, as the cost differential with regular plans widens further.
Key Takeaway
For existing investors, a reduction in expense ratio directly improves net returns over time. A 0.2% difference on a ₹10 lakh portfolio compounded over 10 years is worth roughly ₹35,000–50,000. Check your fund's TER on the AMC website and compare it with equivalent direct-plan alternatives.