The Securities and Exchange Board of India (Sebi) has extended the deadline for public comments on its widely-debated mutual fund proposals, giving the industry an additional week to respond to its suggestions.

The market regulator had earlier sought feedback by 17 November.

The extension to November 24 comes amid widespread concern that the proposed regulations would impact revenues of asset management companies (AMCs), mutual fund distributors and brokers. The draft rules, which are part of a broader regulatory overhaul, were aimed at improving transparency, cutting hidden costs and tightening oversight of intermediaries.

In a consultation paper released last month, the market regulator recommended capping the brokerage and transaction charges levied on investors, costs that are currently permitted over and above the total expense ratio (TER). The TER represents the maximum annual fee a mutual fund can impose on its investors, covering management fees, administrative expenses, brokerage and other operational costs. It is deducted from a scheme’s returns and directly impacts what investors ultimately earn.

Sebi has proposed sharply reducing these brokerage caps, lowering the limit for cash-market trades from 0.12% (12 basis points) of the trade value to 0.02% (2 bps), and for derivatives from 0.05% (5 bps) to 0.01% (1 bps), to ensure that “expenses are charged fairly only once to investors”.

AMCs are concerned that they might have to pay for research expenses instead of passing them on to investors, which could push their operating costs and reduce their profit margins in the short term.

The proposed changes will also scrap an additional charge of 5 basis points AMCs earned over and above the exit load, the fee imposed when an investor exits a scheme prematurely. At present, AMCs collect this fixed 5 bps fee every year based on the fund’s assets, irrespective of whether an investor redeems the units, and is part of the TER.

According to a 30 October report by Nomura Financial Advisory and Securities (India) Pvt. Ltd, removing this 5 bps component could reduce AMCs’ profit before tax for FY27 by 6–8%.

Despite stress in the short term, the proposal, if implemented, is expected to improve transparency for investors, by ensuring that investors are charged only for genuine execution costs, not bundled research fees.