Mutual fund houses have asked the Securities and Exchange Board of India (SEBI) to reconsider its proposal to cap brokerage fees at 2 basis points (bps), according to people familiar with discussions at a meeting held on Monday.
The markets regulator has proposed capping brokerage costs at 2 basis points (bps) as part of a wider overhaul of the total expense ratio (TER) framework for asset management companies. Fund houses currently pay up to 12 bps in broker commissions.
The industry conveyed that the proposed reduction may not be feasible and could affect research and trade execution support provided by brokers. Fund house CEOs have sought a more practical range of around 6–7 bps.
“A direct move from twelve to two basis points will be difficult to implement, especially for smaller schemes. We have requested SEBI to consider a level that reflects operational realities, and they appeared willing to hear us out,” said a senior MF executive present at the meeting.
The brokerage cap is part of SEBI’s broader plan to revise the total expense ratio (TER) framework. A consultation paper issued on October 28 proposed changes to how TER is computed, including excluding statutory levies such as the securities transaction tax (STT) and stamp duty.
Brokerage firms have raised concerns that a steep cut in commissions could impact the quality of services offered to fund houses. SEBI is expected to review the industry feedback before finalising the TER framework.
Published on November 24, 2025
