SEBI plans to lower extra costs charged by mutual funds

Security and Exchange Board of India (SEBI) is thinking about to reduce the extra costs charged by mutual funds on 15 basis points. This move of SEBI is aimed to expand penetration of such products among investors. The officials said that the extra cost charge on mutual fund proposal will be discussed at a meeting this week. They also added that the additional expense of 20 basis points might be decreased to 5 basis points across all mutual fund schemes and this should be reviewed in every two years intervals.

A basis point is one-hundredth of a percentage point.

In 2012, SEBI had allowed mutual funds to charge 20 basis points of assets under management of the plan in lieu of leave loads, or the sum mobilized from investors when they offload possessions.

In case of open-ended debt schemes, the additional charges are lower in comparison to the open-ended equity scheme. Overall open-ended equity schemes, an average exit load of around 5 basis points has been credited back, though a normal extra cost of 18-20 basis points has been charged with such plans.

SEBI is additionally looking to change the administrative structure to empower disclosures related to mutual funds in investor-friendly electronic form. Under this disclosure, all mutual fund houses need to conspicuously reveal total cost charged to customers on a daily basis for all mutual fund schemes under a separate head on their websites.

In addition, they have to communicate to investors latest Net Asset Values (NAVs) through SMS following a demand from the unitholder.

Right now, there are 42 mutual fund houses in India who are managing assets of over Rs 22 lakh crore