SEBI Proposes Comprehensive Review of Mutual Fund Regulations, 1996

Consultation Paper; Dated: 28.10.2025

1. Background

The Securities and Exchange Board of India (SEBI) has issued a Consultation Paper proposing a comprehensive review of the SEBI (Mutual Funds) Regulations, 1996.

This initiative is part of SEBI’s ongoing efforts to modernise regulatory frameworks, simplify compliance requirements, and enhance transparency in the functioning of mutual funds.

The review marks one of the most extensive overhauls of the mutual fund regulations since their inception, reflecting the significant evolution of India’s asset management industry over the past three decades.

2. Objective of the Review

The primary goals of this regulatory review are to:

• Promote ease of compliance for mutual fund entities,
• Streamline and consolidate provisions to remove redundancies,
• Provide regulatory clarity in areas that have evolved over time, and
• Ensure investor protection through better disclosure and governance standards.

3. Key Proposals in the Consultation Paper

The Consultation Paper outlines several key reform proposals, including:

• Revised Expense Ratio Slabs

1. 1. Introduction of a restructured Total Expense Ratio (TER) framework based on asset size and scheme category.
   2. The proposed slabs aim to balance investor interests with the operational viability of Asset Management Companies (AMCs).

• Detailed Valuation Guidelines – Formulation of uniform valuation norms across asset classes to ensure consistency and transparency in Net Asset Value (NAV) computation.
• Enhanced Disclosure of Total Expense Ratio – Mandating clear and standardised disclosure of TER across all investor touchpoints, including factsheets, websites, and scheme documents, to improve comparability and informed decision-making.
• Eligibility Criteria for Mutual Fund Registration – Introduction of updated eligibility norms for registration of new mutual funds, focusing on financial soundness, governance standards, and fit-and-proper criteria for sponsors and trustees.

4. Stakeholder Consultation

SEBI has invited public comments on the proposed changes from all stakeholders, including:

• Mutual Fund Houses and AMCs,
• Industry associations,
• Financial intermediaries, and
• Retail and institutional investors.

Comments can be submitted till November 17, 2025, through the prescribed channels specified in the consultation paper.

5. Expected Impact

The proposed review is expected to:

• Simplify compliance for mutual fund entities,
• Strengthen governance and valuation transparency,
• Enhance investor trust through improved disclosures, and
• Align the regulatory framework with global best practices in fund management.

6. Conclusion

SEBI’s Consultation Paper on the comprehensive review of the SEBI (Mutual Funds) Regulations, 1996 represents a forward-looking step towards modernising India’s mutual fund ecosystem.

Stakeholder feedback received by November 17, 2025, will play a crucial role in shaping the final regulatory amendments to promote efficiency, transparency, and investor confidence in the mutual fund industry.

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