New Delhi: The advisory body constituted by capital market regulator Securities and Exchange Board of India has batted for increasing the expense ratio, charged by mutual funds to manage and operate schemes, by 20-25 basis points, media reports said, citing sources.
"The advisory committee has recommended on the lines of the industry's demand for a higher expense ratio along with flexibility," a source told the Hindu Business Line.
Expense ratio is a measure of what it costs an asset management company to operate a mutual fund.
The 14-member mutual fund advisory committee (MFAC), which met Tuesday, also proposed excluding service tax from this fee. The exclusion of service tax from the expense ratio will lead to investors incurring costs to the tune of another 30 basis points.
Presently, mutual funds charge 1% as asset management fees of the total expense ratio of 2.25%. The remaining 1.25% is used to meet operating expenses, auditor & registrar charges and advertising and marketing costs, among others.
Recently, Economic Affairs Secretary R Gopalan had met representatives of the mutual fund industry and Financial Advisors' Association, after Prime Minister Manmohan Singh, who has taken additional charge as the finance minister, said that problems faced by the mutual fund industry needed to be settled.
The mutual fund industry is going through a lean phase in the past couple of years with its gross resource mobilization falling to Rs 6.8 million in fiscal 2011-12, from Rs 10 million in 2009-10.
The proposals will now be discussed in the next board meet, that is likely to be held on August 16.