TER Slabs & AUM Scale
SEBI caps the base expense ratio on a sliding scale — the bigger the fund, the less it's allowed to charge. Scale is supposed to reach the investor.
Why you care
SEBI doesn't let a fund charge whatever it likes. It caps what a fund can charge on a sliding scale tied to fund size: the first few hundred crore of assets can carry the highest fee, and every additional slab of AUM is capped lower. The bigger the fund, the lower the percentage it's allowed to charge. Scale is meant to reach the investor.
Run the numbers
Equity BER caps step down: 2.10% on the first ₹500 cr, then 1.90%, 1.60%, 1.50% and lower — with statutory levies like GST charged on top (2026 SEBI framework). Blend those and an ₹8,000 cr equity fund can charge at most ~1.53% base, not 2.10%. Grow past ₹50,000 cr and the cap floors near ~0.95%.
Where this goes
Why you care
TER slabs are SEBI's sliding scale of expense-ratio caps, set by how large a fund is. Rather than a single flat limit, the rules carve AUM into bands and cap each band at a lower percentage than the one before it. The intent is explicit: as a fund grows, running each extra rupee gets cheaper, and the regulator forces some of that saving back to investors instead of letting it pool as AMC profit. From 2026 SEBI frames these caps as the Base Expense Ratio — the ceiling excludes statutory levies like GST, STT and stamp duty, which are charged separately on actuals on top.
This closes a causal loop most investors never notice. A fund's AUM determines its expense ceiling, and a bigger fund is pushed toward a lower ceiling. So fund size isn't just an AMC bragging point; it's structurally linked to what you pay. It's also why the same category can have funds at very different TERs: a giant index fund and a boutique active fund face different slab caps and different actual costs.
Run the numbers
The equity open-ended base-expense-ratio caps look like this under SEBI's 2026 framework (hard limits; statutory levies are charged on top):
| AUM band | Max BER (equity) |
|---|---|
| First ₹500 cr | 2.10% |
| ₹500–750 cr | 1.90% |
| ₹750–2,000 cr | 1.60% |
| ₹2,000–5,000 cr | 1.50% |
| ₹5,000–10,000 cr | 1.40% |
| Beyond, tapering | down to ~0.95% above ₹50,000 cr |
Debt schemes are capped about 0.25% lower at each band. Crucially the cap is blended, not a single slab. Take an ₹8,000 cr equity fund and fill the bands: ₹500 cr at 2.10%, ₹250 cr at 1.90%, ₹1,250 cr at 1.60%, ₹3,000 cr at 1.50%, and the remaining ₹3,000 cr at 1.40%. That totals about ₹122 cr of allowed base expense on ₹8,000 cr, or a maximum base expense ratio of ~1.53% — well under the 2.10% headline. On top of that sit the statutory levies — GST, STT, stamp duty, exchange fees — now charged on actuals rather than bundled inside the cap. That's why the all-in TER a fund publishes sits above its base-expense-ratio slab number.
Where this goes
The slabs set the ceiling that a fund's TER must respect, so they're the regulatory reason a large fund's cost is bounded. Traced back, they're driven by AUM: the size of the pool decides the cap. Read the chain in one line — aum → ter-slabs → ter → net return. The reason an investor should care about fund size becomes concrete rather than abstract: size is one of the few things that mechanically lowers what you pay.