Can a small 10 to 15 bps cut in mutual fund costs really change your wealth journey

SEBI has trimmed the maximum base expense ratio that mutual funds can charge by about 10 to 15 basis points for most open ended schemes, and a little more for close ended funds. On paper this looks like a tiny change, but over long periods it can add up to a meaningful extra amount in your pocket because less money leaks out as fees and more stays invested to compound. At the same time, SEBI has cleaned up the way costs are shown so you can see clearly what the fund house earns and what you pay as statutory charges like GST or STT.

Earlier, a single Total Expense Ratio number used to bundle the fund’s own fees along with brokerage, GST, STT and other statutory levies, so investors often assumed every rupee of that went to the AMC. Now SEBI has shifted to a Base Expense Ratio idea where the cap applies only to the core fund expenses, while taxes and exchange levies are billed on actuals and shown separately, so you get more transparent disclosure. Equity funds, debt funds, index funds and ETFs all see slightly lower caps, for example index and ETF base expenses drop from 1 percent to 0.9 percent, and many fund of fund and close ended schemes get cuts of 15 to 25 bps. This means that while headline numbers are being reset, the real story is that cost slabs at higher assets are tighter and disclosures are cleaner, so large funds are nudged to pass on economies of scale.

For your investments, the first impact is slow and steady savings; on a 10 lakh lump sum growing at 12 percent a year, even a 20 bps lower expense can mean roughly 3 lakh extra over 20 years, which is like getting an extra small SIP only from reduced costs. Second, direct plans should remain meaningfully cheaper than regular plans because distribution commission continues to be carved out, so long term investors who can handle basic online processes may gain more by preferring direct options. Third, categories like index funds, ETFs and some close ended schemes now look even leaner on costs, so this move gently pushes portfolios towards simpler and more efficient products, but it still does not replace asset allocation, discipline and fund selection, which matter much more for your long term outcomes.