SEBI has approved a comprehensive rewrite of the mutual fund rulebook called the SEBI (Mutual Funds) Regulations, 2026, replacing the nearly three‑decade‑old 1996 framework. These reforms aim to lower investor costs, improve fee transparency, and simplify regulations so mutual funds remain a reliable long‑term wealth creation vehicle for Indian households.

As your advisory partner, NovaRock Advisory’s role is to translate these complex regulatory changes into clear, portfolio‑level actions so that your money continues to work efficiently under the new regime.

1. From TER to BER – How Mutual Fund Costs Are Changing

Until now, investors saw a single number called the Total Expense Ratio (TER), which bundled fund‑management fees, distribution expenses, brokerage, and even certain statutory charges. Under the 2026 framework, SEBI is shifting to a more granular structure centred around a Base Expense Ratio (BER).

This new design separates what the fund house actually earns from what you pay as unavoidable taxes and market levies, making it easier to compare schemes and spot genuinely efficient funds.

1.1 Base Expense Ratio (BER)

• BER is the core, ongoing fee that the asset management company (AMC) and distributors earn for running the scheme.
• SEBI has introduced lower or more finely‑graded BER caps across categories to reduce long‑term cost drag for investors.
• For example, reports indicate that BER for index funds/ETFs is now capped around 0.90%, while active equity schemes have slabs going up to about 2.10% for smaller AUM and dropping for larger funds.

1.2 Brokerage, Transaction Costs and Statutory Levies

• Brokerage and transaction costs are now capped separately – for example, cash‑market brokerage is reported around 0.06% and derivatives near 0.02%, below earlier ceilings.
• Statutory charges such as STT, CTT, GST, stamp duty, SEBI fees and exchange charges will be shown distinctly, outside BER, and charged on actuals.
• This separation should help investors see **what the AMC controls versus what is mandated by law**, improving comparability across schemes.

Put simply: the **headline number you see for ongoing costs should become more transparent**, and for many categories the all‑in cost of owning funds is expected to trend lower over time.

2. Other Important Features of the 2026 Framework

While cost caps attract the most attention, SEBI’s overhaul also touches market‑structure, governance, and disclosure norms that indirectly affect investor outcomes.

2.1 Simpler, More Compact Regulations

Commentaries on the reform note that the mutual fund regulations have been significantly **shortened and reorganised**, with some estimates suggesting around a 40–45% reduction in length. A more compact rulebook can speed up industry response times, reduce interpretational disputes, and promote faster product innovation in the interest of investors.

2.2 Exit‑Load Linked Expense Removed

SEBI has removed the additional expense linked to exit loads that AMCs were earlier allowed to charge, eliminating a subtle layer of extra cost that few investors understood. This change helps ensure that what you see as the ongoing expense is closer to what you actually pay over your holding period.

2.3 Performance‑Linked Fees and Governance

Subject to conditions, certain schemes may now have the flexibility to adopt **performance‑linked fee structures**, where part of the AMC’s income depends on returns delivered over a benchmark. At the same time, SEBI has emphasised stronger governance standards, clearer role separation between sponsors, AMCs and trustees, and more robust digital disclosures.

3. What This Means for Your Portfolio with NovaRock Advisory

NovaRock Advisory already runs a **cost‑aware, research‑driven fund selection process**, and the 2026 rules reinforce the importance of that discipline. Our focus is not only on returns, but on the **net return after all costs, taxes and risks**.

• Cost Audit Under New BER Slabs: we will review portfolios to identify schemes sitting at the higher end of the new BER range without commensurate, consistent outperformance.
• Category & AUM‑Based Optimisation: where appropriate, we may recommend shifting from small, high‑cost funds to larger, efficient peers that benefit more from the new slab structure.
• Active vs Passive Calibration: with index funds and ETFs now enjoying lower BER caps, passive strategies may become more attractive in certain segments, especially large‑cap exposures.

Any recommendations will be tailored to your risk profile, investment horizon, and financial goals, not driven purely by headline changes or market noise.

4. Practical Next Steps for Investors in 2026

Regulatory changes matter most when they translate into clear actions. Here is how investors can use the 2026 regulations to their advantage, with professional support.

1. Request a post‑2026 expense review: understand how your current TER breaks into BER, brokerage, and statutory levies, and how this affects long‑term return projections.
2. Re‑evaluate expensive funds: identify schemes where costs remain high relative to performance and discuss whether there are more efficient alternatives.
3. Clarify the role of each fund: ensure every scheme in your portfolio has a clear purpose (core, satellite, tactical) under the new cost and governance framework.
4. Schedule regular reviews: as AMCs update their Scheme Information Documents (SIDs) and Key Information Memoranda (KIMs), periodic reviews will keep your plan aligned with the latest disclosures.