Tuhin Kanta Pandey, Chairman of the Securities and Exchange Board of India (SEBI), has dismissed concerns that setting a maximum limit on fund fees has caused most fund houses to charge fees close to that limit.
In an exclusive interview with CNBC-TV18 on Wednesday, Pandey said, “I will not agree with your point that the fixation of an upper ceiling (Total Expense Ratio or TER) is a way to cartelisation.” TER is an annual fee charged by a mutual fund to cover its costs, and it is indirectly paid by investors through deductions from their returns.
The SEBI Chief said there’s healthy competition in the market, giving examples like brokerage services—where some firms charge nothing despite a 2.5% fee cap—and debt mutual funds, where fees are often much lower than the 2% limit. He also said equity mutual funds are competing too, and that investors mainly care about returns, not just the fee levels.
The comments respond to industry criticism that TERs, often set close to SEBI’s equity fund limits, are disconnected from performance, limiting performance-based pricing.
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In the same interview, Pandey also confirmed that SEBI has received two applications for a new investment product between mutual funds and PMS, with approvals expected within 10 days. The new framework, already in place, aims to give retail investors access to advanced investment strategies typically reserved for wealthier clients.
“The new regulation framework has already been out. Now we have received two applications, also from two AMCs. So I think in a matter of 10 days, we would have cleared them,” he said.
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