Expense ratio deducted on a daily basis as charges towards different administrative, distribution, management and other heads is applicable on products including ULIPs, mutual funds, NPS etc. And after factoring in these charges, net asset value or NAV for a scheme is published.
The deduction in respect of the same is meager when one day time is considered nonetheless it affects returns for an investor considerably when long term outlook of say 5-10 years is taken into view.
Debt Mutual Funds unlike equity mutual funds have seen lower expense ratio as in the scenario when the rates are declining, the funds in the category are either waiving off such charges or are reducing them. This is done mainly to ensure that return to investors in net remain positive.
Also, the fund's net assets have a bearing on expense ratio and these share inverse relationships which means if assets of a fund house increase the expense ratio which is just the smaller percentage of net assets decrease in the same proportion.
In complete, lower expense ratio helps attain the targeted financial goal much earlier taking the return parameter as constant year on year.