The Securities and Exchange Board of India (SEBI) is open to raising the proposed cap on the fees that mutual funds pay to brokerages, which it had sought last month to bring down sharply as part of an overhaul of mutual fund structures, two sources with direct knowledge of the matter said.
This would help address concerns of institutional brokers who feared a hit to their revenue and asset managers who have argued that a lower cap could impact their ability to pick the right stocks, the sources said.
The sources declined to be identified as consultations between the SEBI and the industry are private.
An e-mail query sent to SEBI was not immediately answered.
SEBI had proposed changes to mutual fund fee structures late last month to make them more transparent and to reduce costs for investors.
As part of this, it had proposed lowering the cap on brokerage fees paid by mutual funds for cash market transactions to 2 basis points from 12 basis points.
The proposal, if implemented, would have led to a wide divergence in rules between India and developed markets like the U.S. where there is no cap on brokerage fees paid by funds.
According to the two sources, the industry has argued the sharp cut will reduce the fees they can pay to sell-side research analysts, handing foreign investors and hedge funds an advantage as they will be able to pay a relative higher fee.
“The industry has argued equity schemes typically need higher research support. Any cut in research fees will impact returns as well,” said one of the sources.
There is some merit in the arguments but SEBI’s analysis has shown that foreign investors are more conservative in paying for research as compared to mutual funds, the source added.
SEBI wants to reduce the cost for retail investors and attract them towards investing, the source said, adding “but there is definitely room to negotiate to address industry concerns as well as achieve SEBI’s objective”.
The new cap will be decided after industry consultations are concluded by mid-November, the sources said.
Published on November 6, 2025
