Mumbai, November 6, 2025:
India’s market regulator, the Securities and Exchange Board of India (SEBI), is considering a revision to its earlier proposal to drastically cut the brokerage fees that mutual funds pay to stockbrokers, according to a Reuters report citing two sources familiar with the matter.
SEBI had earlier suggested reducing the brokerage cap on cash market transactions from 12 basis points (bps) to 2 bps, as part of a larger overhaul aimed at improving transparency and lowering investor costs. However, following strong opposition from asset management companies (AMCs) and institutional brokers, the regulator is now open to raising the proposed cap, Reuters reported.
Industry concerns over research and execution quality
Asset managers and brokers had expressed concerns that such a steep cut would severely limit their ability to pay for high-quality sell-side research and stock selection, potentially hurting mutual fund performance and giving an edge to foreign institutional investors (FIIs) who face no such restrictions.
“The industry has argued that equity schemes typically need higher research support. Any cut in research fees will impact returns as well,” one of the sources told Reuters.
According to the report, SEBI acknowledged there was some merit in the argument but noted that its internal analysis showed that foreign investors were more conservative in paying for research compared to Indian mutual funds.
Regulatory intent and next steps
While SEBI’s main objective remains reducing retail investor costs and encouraging wider participation, officials are reportedly exploring a middle ground to balance transparency with industry sustainability.
“The regulator wants to reduce overall costs for investors but is open to adjustments that address industry concerns,” a source was quoted as saying, adding that consultations with market participants are expected to conclude by mid-November 2025.
The final decision on the new brokerage fee cap will be announced after SEBI reviews all stakeholder feedback.
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