Under SEBI Regulation 52(6), what is the maximum permissible base Total Expense Ratio (TER) on the first ₹500 Crore of daily Net Assets for an open-ended Debt Mutual Fund scheme?

[ A ]Maximum 2.25% of daily Net Assets (Equity scheme limit).

[ B ]Maximum 1.00% of daily Net Assets.

[ C ]Maximum 0.50% of daily Net Assets.

[ D ]Maximum 2.00% of daily Net Assets.[ CORRECT ]

Takeaway

Option D is correct: Maximum 2.00% of daily Net Assets.

Derivation

Debt schemes sit on a lower TER ladder than Equity schemes under Regulation 52(6)(c), reflecting their comparatively lower active-management cost and risk. The cap on the first ₹500 Crore of daily net assets is 2.00%, stepping down to 1.75% on the next ₹250 Crore, 1.50% on the next ₹1,250 Crore, 1.35% on the next ₹3,000 Crore, 1.25% on the next ₹5,000 Crore, and a further 0.05% reduction per additional ₹5,000 Crore slab thereafter, tapering to a 0.80% floor on the balance AUM. The 0.25-percentage-point gap versus the Equity scheme cap of 2.25% on the same first slab reflects that debt fund management — largely credit and duration calls — is structurally less research-intensive than active stock-picking.

Why the others fail

A — Maximum 2.25% of daily Net Assets (Equity scheme limit).

2.25% is the Equity scheme ceiling on the first ₹500 Crore; Debt schemes are capped lower, at 2.00%, on the same slab under Regulation 52(6)(c).

B — Maximum 1.00% of daily Net Assets.

1.00% is the base TER cap for passive Index Funds and ETFs, not for actively managed Debt schemes, which carry a higher 2.00% ceiling on the first slab.

C — Maximum 0.50% of daily Net Assets.

0.50% applies to dedicated unclaimed dividend/redemption schemes, a narrow category distinct from the general open-ended Debt scheme TER cap of 2.00%.