Sebi expands mutual funds’ scope beyond top 30 cities
G Mahalingam, whole time director of Sebi had said that mutual fund houses need to cut expense fee. G Mahalingam, whole time director of Sebi had said that mutual fund houses need to cut expense fee.
The Securities and Exchange Board of India (Sebi) on Friday released two circulars to reduce the total expense ratio (TER) of mutual funds.
In the first instance, the capital markets regulator has expanded the scope of its so-called T15/B15 cities to T30/B30. T15 refers to the top 15 cities and B15 refers to beyond the top 15 cities.
Current Sebi rules allow mutual fund houses to charge an extra 30 basis points of the assets under management (AUM) of a scheme if the new inflows from B15 cities are at least 30 per cent of gross new inflows or make up 15 per cent of the average AUM.
The new Sebi circular, which will be applicable from April 1 has expanded the scope of T15 to T30 cities. This means that more inflows would need to come from smaller towns for mutual fund houses to be able to charge this 30 basis points expense ratio.
“The additional TER for inflows from beyond top 15 cities (B15 cities) was allowed with an objective to increase penetration of mutual funds in B15 cities. Since more than five years have elapsed and on review, it is now decided that the additional TER of up to 30 basis points would be allowed for inflows from beyond top 30 cities instead of beyond top 15 cities,” said the Sebi circular.
Secondly, current rules allow mutual fund houses to charge additional expenses of 20 basis points of AUM in case they do not charge an exit load or if an exit load is not applicable.
The second Sebi circular has scrapped this provision. It further said if any mutual fund is charging such an additional expense fee then it should stop it immediately.
Earlier, G Mahalingam, whole time director of Sebi had said that mutual fund houses need to cut expense fee.
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