SEBI Lowers Expense Charges For Mutual Fund To 5bps

In a bid to increase the penetration of mutual funds, the capital market regulator SEBI has lowered additional charges for mutual funds to just 5 basis points. 1 basis point is one-hundredth of a percentage point.

In a notification dated May 29, SEBI informed that the reduction has been made across all mutual fund schemes from the existing 20 basis points charged as additional expense to just 5 basis points.

The move will lower the cost of investing in mutual funds while at the same time lower the incentives or commission for mutual fund distributors. Since the year 2012, the additional charges to the tune of 20 basis points of assets under management of the scheme have been charged by the mutual fund houses in respect of exit load.

It is to be noted that in case of balanced and open-ended equity schemes, the additional expense is way higher that actual credit back of exit load to the scheme. However, in case of open-ended debt scheme, the charges are comparatively lower.

On an average, 18-20 basis points as additional expense is charged to all of the open-ended balanced and equity schemes while just 5 basis points as exit load is credited back.
At the same time, the regulator has overhauled the regulatory framework to make disclosures more investor-friendly.

The regulator has relinquished the usual practice of publishing daily NAVs, sale or re-purchase price in newspapers. Also, it will no longer engage in sending hard copies of annual reports of the scheme to all investors. Instead, henceforth investors can take note of these details through the website of AMFI or mutual funds.

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