Government Policy Updates That Could Impact Investment Funds

Snapshot: Why 2025 policy shifts matter

Rules drive costs, disclosures, liquidity, and taxes. In 2025, three levers stand out:

• Fund fees and disclosures for mutual funds are being overhauled.
  
• AIF rules now enable cleaner co-investment and updated onboarding mechanics.
  
• Rates and liquidity changed after the RBI’s easing cycle, affecting debt funds and asset allocation. 

Use this guide to see what may change for your portfolio and how to prepare.

Mutual fund costs: TER, brokerage caps, and transparency

What’s proposed

• Plain-English fee breakup and simpler structures. SEBI’s October 2025 consultation proposes a clearer separation of expense heads and simpler charging for investors.
  
• Lower caps on brokerage paid by MFs. Proposal to cut cash-market brokerage from 12 bps to 2 bps and derivatives from 5 bps to 1 bp, with ongoing industry consultation.
  
• Active review of the TER cap. SEBI has signalled willingness to revisit limits for market balance and transparency. 

Why it matters

• Lower ongoing costs can improve investor take-home returns over time.
  
• Brokerage caps could compress distributor economics, but benefit unitholders via lower scheme costs if implemented as proposed.
  

What’s already in force

• AMCs continue to notify base TER changes under existing rules while the new framework is being finalized.
  

Action for investors: Track fund-house notices and compare like-for-like direct plans. Re-check expense ratios before large SIP top-ups.

Better performance disclosure: Information Ratio (IR)

SEBI mandated risk-adjusted return disclosure (Information Ratio) for schemes, improving comparability across funds since January 2025. Expect crisper fund fact-sheets and more accountability for alpha.

Action: Use IR alongside CAGR and volatility. For a primer on return metrics, see our explainer on CAGR vs absolute returns: https://equentisinvestech.com/cagr-vs-absolute-returns-understanding-mutual-fund-growth-metrics/

Launches, NFO deployment, and strategy approvals

SEBI tightened the timeline discipline for NFO money deployment, typically within 30 business days, and introduced a structured process for launching “investment strategies.” This reduces cash drag and clarifies governance.

Action: Prefer AMCs with consistent NFO deployment track records. Avoid chasing theme NFOs without a 5–7 year use-case.

AIFs: Co-investment, accreditation, and regulatory refresh

What’s new

• The co-investment framework within AIFs now has a formal SEBI circular that aims to align interests and reduce conflicts.
  
• AIF Regulations updated in September 2025, continuing a multi-year tightening cycle on valuation, disclosures, and investor protection.
  
• SEBI has consulted on widening accreditation scope via KRAs and allowing provisional onboarding, which could streamline access for eligible investors. 

Action for HNIs/Family Offices: Re-validate eligibility, side-letter terms, and co-investment rights. Review drawdown schedules and exit waterfalls under the latest framework. For a deeper AIF primer, start here:

• https://equentisinvestech.com/alternative-investment-funds-in-india/
  
• https://equentisinvestech.com/aifs-vs-mutual-funds-portfolio-diversification/
  
• https://equentisinvestech.com/aifs-regulatory-changes-investors-must-track/
  

RBI policy: Lower rates and easy liquidity shift debt-fund math

RBI cut the repo rate by 100 bps YTD to 5.50% and reduced CRR in 2025, while also deploying large-scale bond purchases to keep liquidity easy. Debt yields and duration risk-reward have shifted as inflation guidance eased into FY26.

Implications for funds

• Duration can benefit if the easing bias persists, but mark-to-market risk rises.
  
• Money-market and short-duration funds see lower carry over time as yields drift down.
  
• MF lending and collateral markets have shifted share across tri-party repo vs market repo in H1 FY26.
  

Action: Stagger entries into duration. Keep emergency funds in liquid/ultra-short but accept that post-cut yields reset lower.

Taxes: What stayed and what to watch

• LTCG at 12.5% (post Budget 2024) stays in effect; no new hike announced for FY 2025-26 at the time of writing. Equity-oriented funds retain equity taxation; debt-fund rules differ by purchase date.
  
• Capital gains character for Cat I/II AIF unitholders continues to be taxed in unit-holders’ hands as capital gains; Budget 2025 clarified treatment for securities transaction income.
  

Action: Map each holding to its tax lot date. Use SWP/SIP timing to manage brackets. For related reads:

• https://equentisinvestech.com/bonds-taxation-in-india-2025/
  
• https://equentisinvestech.com/ipo-listing-time-india-sebi/
  

Operational and investor-protection hygiene

SEBI continued rolling updates on digital accessibility compliance, cybersecurity clarifications, and smooth transmission of securities to nominees or legal heirs, small, practical wins for investors and family offices.

Action: Update nominations, check PoA/folio details, and review your AMC and RTA online access for compliance-ready documentation.

Portfolio playbook: Three decisive moves for 2025

1. Cost discipline: Prefer direct plans with competitive TERs. Re-benchmark every core equity and debt fund against the lowest-cost peers in its category.
   
2. Barbell for debt: Combine ultra-short for liquidity with a measured sleeve of high-quality medium duration to benefit from easing, sized to your risk tolerance.
   
3. AIF due diligence: If you allocate to AIFs, re-paper co-investment, and onboarding under the September 2025 framework, and confirm waterfall mechanics. 

FAQs

1) Will mutual fund investing get cheaper in 2025?
Likely, if SEBI’s proposals on fee simplification and brokerage caps are implemented after consultation. Monitor final circulars and each scheme’s TER file. 

2) Do these changes affect direct plans?
Yes. TER rules apply to both direct and regular plans. Direct plans still avoid distribution load, but base expenses can move. 

3) What should debt investors do after the RBI’s cuts?
Keep liquidity in ultra-short/liquid. Add duration gradually if your horizon allows and you can handle NAV swings. 

4) Are AIF co-investments safer now?
They are clearer in structure and process, but not risk-free. Assess deal terms, conflicts, and valuation discipline at the fund level.

5) Any immediate tax change on equity-fund LTCG?
No fresh hike disclosed for FY 2025-26; the 12.5% rate from Budget 2024 remains in effect at the time of writing.

Conclusion

Policy is trending toward lower costs, sharper disclosures, and stronger governance, with easier liquidity from the RBI. Align your portfolio to benefit from cost compression, disciplined NFO timelines, and evolving AIF mechanics without stretching beyond your risk budget.

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