Under SEBI (Mutual Funds) Regulations, what is the maximum Total Expense Ratio (TER) limit chargeable on the first Rs. 500 crore of daily net assets for an open-ended equity-oriented scheme?

[ A ]1.85 percent of daily net assets

[ B ]2.10 percent of daily net assets[ CORRECT ]

[ C ]5.00 percent of daily net assets

[ D ]0.90 percent of daily net assets

Takeaway

Option B is correct: 2.10 percent of daily net assets

Derivation

SEBI mandates progressive AUM-based TER limits for open-ended schemes. For equity-oriented schemes (investing >=65% in equity), the maximum TER on the first Rs. 500 crore of daily net assets is 2.10%. (In contrast, for non-equity oriented schemes, the limit on the first Rs. 500 crore is 1.85%). Subsequent slabs decrease progressively (1.90% on next 250 cr, 1.60% on next 1,250 cr, 1.50% on next 3,000 cr, etc.). This question tests exact statutory expense caps. The most common error is confusing the equity limit (2.10%) with the debt limit (1.85%) or the Index fund cap (0.90%).

Why the others fail

A — 1.85 percent of daily net assets

1.85% is the statutory TER limit for the first Rs. 500 crore of non-equity (debt-oriented) schemes, not equity schemes.

C — 5.00 percent of daily net assets

5.00% is an excessively high historical figure and far exceeds SEBI's strict statutory expense ceiling of 2.10%.

D — 0.90 percent of daily net assets

0.90% is the statutory TER ceiling applicable to Index Funds, ETFs, and certain Fund of Funds, not active equity schemes.