SEBI May Soften Stance on Mutual Fund Brokerage Cap After Industry Pushback

India’s markets regulator, SEBI, is open to revising its proposed sharp cut in brokerage fees paid by mutual funds, according to two sources familiar with the matter. The move comes after strong industry pushback against the plan to reduce the cap from 12 basis points (bps) to 2 bps for cash market trades. Asset managers and institutional brokers had warned that such a steep reduction could undermine research quality, hurt stock-picking ability, and put domestic funds at a disadvantage against foreign investors who can pay higher fees. They argued that equity funds rely heavily on sell-side research, and lower fees could impact investor returns. While SEBI remains committed to lowering costs for retail investors and enhancing transparency in fund expenses, it now acknowledges the need to balance investor protection with market efficiency. The regulator has found that foreign investors are often more conservative in research spending than Indian mutual funds, adding nuance to the debate. With consultations ongoing, a final decision on the revised cap—expected by mid-November—could see a middle ground, allowing SEBI to curb excessive costs without crippling research ecosystems. The outcome will shape how Indian mutual funds access critical market insights while maintaining competitiveness.