18 December 2025

• SEBI, in its recent board meeting, approved wide-ranging reforms in mutual fund expenses, brokerage norms, IPO disclosures, and credit rating regulations.
• The measures aim to reduce investor costs, modernise outdated regulations, and strengthen governance and transparency in capital markets.
• SEBI also reviewed the High-Level Committee (HLC) report on conflict of interest, signalling further reforms in regulatory ethics.

Key Points

• Mutual Fund Expense Reforms
  • Maximum expense ratio reduced by up to 15 basis points, slab-wise based on AUM.
  • TER renamed as Base Expense Ratio (BER).
  • BER excludes GST, stamp duty, STT and statutory levies.
  • Total cost to investor = BER + brokerage + regulatory + statutory levies.
  • Additional exit load of 5 bps on premature redemption removed.
• Brokerage Rationalisation
  • Brokerage cap fixed at:
    • 6 bps for cash market  
    • 2 bps for derivatives
  • SEBI dropped proposal for further reduction due to infeasibility of unbundling sell-side research costs.
  • Sell-side research remains a bundled component of brokerage, as seen globally.
• Regulatory Simplification
  • Mutual fund regulations streamlined after two decades, clarifying:
    • Roles of AMCs
    • Prudential investment limits  
    • Valuation norms
  • Stock broker regulations updated with simpler language and contemporary practices.
• IPO Disclosure Reforms
  • Offer document summary removed.
  • Replaced with abridged prospectus, accessible via QR code.
  • Objective: easier and quicker investor access to key information.
• Credit Rating Expansion
  • Credit Rating Agencies allowed to rate unlisted debt instruments, improving transparency in debt markets.
• Governance
  • SEBI reviewed the HLC report on conflict of interest and will deliberate after public consultation.

Static Linkages

• SEBI Act, 1992: investor protection and market regulation.  Capital market efficiency and intermediation
• Disclosure-based regulation and market integrity (Economic Survey).
• Ethical governance and conflict of interest norms (Second ARC).

Critical Analysis

• Advantages
  • Lower expenses improve long-term MF returns for retail investors.
  • Clearer cost structure enhances transparency and trust.  
  • Simplified IPO disclosures promote financial inclusion.
  • Updated regulations reflect market maturity and digitisation.
  • Rating of unlisted debt supports bond market development.
• Concerns
  • Tighter brokerage caps may affect quality of market research.
  • Smaller AMCs may face cost pressures.
  • QR-based disclosures depend on digital access and literacy.
  • Conflict of interest reforms require strong enforcement, not just guidelines.

Way Forward

• Periodic review of expense caps to balance investor interest and industry sustainability.
• Strengthen disclosure norms for research and brokerage practices.
• Expand investor education on costs and risks.
• Implement conflict-of-interest rules with clear accountability mechanisms.
• Align reforms with global best practices, adapted to Indian markets.

SC OPINION ON GOVERNOR FLAWED

KEY HIGHLIGHTS

• Governors in several States have delayed action on Bills passed by State Legislatures.
• In April 2024, the Supreme Court held that Governors must act within a reasonable time and declared certain Tamil Nadu Bills as deemed assented.
• The President sought an advisory opinion under Article 143 on whether courts can impose timelines.
• In November 2024, a five-judge Constitution Bench ruled that courts cannot fix timelines for Governors, but may intervene in cases of prolonged and unexplained inaction pasted.

Key Points

• Article 200 gives Governor three options:  Assent to the Bill
• Return the Bill (except Money Bills)  Reserve the Bill for President
• Supreme Court held:
  • No mandatory timelines can be imposed by courts.
  • Courts may issue limited mandamus in extreme cases of inaction.
• Advisory opinion under Article 143 is non- binding.
• No clarity provided on what constitutes “reasonable time”.

Static Linkages

• Governor as nominal constitutional head  
• Principle of aid and advice
• Federalism and State autonomy  
• Constitutional morality
• Constituent Assembly Debates
• Separation of powers

Critical Analysis

• Pros
  • Protects constitutional discretion of Governor.
  • Prevents judicial overreach.
• Cons
  • Enables indefinite delays by unelected authority.
  • Weakens State legislature supremacy.  
  • Undermines cooperative federalism.
  • Ignores Constituent Assembly intent of Governor’s limited role.

Way Forward

• Parliament to clarify timelines under Article 200.
• Judicially evolve objective tests for “reasonable time”.
• Reinforce aid and advice convention.
• Use political and institutional dialogue to reduce friction.

QUALITY ORDERS: WELCOME RESET

• In November 2025, the Government withdrew mandatory BIS certification (QCOs) for select industrial raw materials.
• Decision followed a NITI Aayog review highlighting over-expansion of QCOs.
• QCOs rose from ~70 to over 790 (2025), covering several low-risk industrial intermediates.
• Withdrawal applies to 14 products (Chemicals & Petrochemicals) and 6 products (Mines).

Key Points

• QCOs mandate compulsory BIS certification, testing and factory audits.
• Covered items included polymers, fibre intermediates, aluminium, copper and select steel grades.
• Foreign suppliers (EU, Japan, Korea) avoided audits for low-volume exports.
• Resulted in input shortages, higher costs and delays, especially for MSMEs.
• Export sectors (textiles, electronics, engineering goods) lost price competitiveness.
• EU and US regulate mainly finished and safety- critical goods, not bulk raw materials.
• Rollback supports PLI sectors by easing access to global inputs.

Static Linkages

• BIS Act, 2016 – standards enforcement
• Ease of Doing Business – reduced compliance costs
• WTO TBT Agreement – avoidance of unnecessary trade barriers
• Risk-based regulation – proportionality in governance

Critical Analysis

• Pros
  • Cuts regulatory burden and transaction costs  
  • Improves input availability and supply-chain resilience
  • Enhances export competitiveness
  • Aligns with global regulatory practices
• Concerns
  • Risk of quality dilution without strong surveillance
  • Dependence on voluntary standards needs enforcement capacity
  • BIS infrastructure constraints persist

Way Forward

• Adopt risk-based, product-specific QCOs
• Mandate certification only for safety-critical goods
• Strengthen post-market surveillance  
• Expand BIS testing capacity
• Institutionalise regulatory impact assessments

• An impeachment motion has been initiated against a sitting High Court judge.
• The move has triggered debate on judicial independence versus accountability.
• The issue highlights the role of Parliamentary oversight in a constitutional democracy.
• It brings focus to the impeachment mechanism of judges under the Constitution.

Key Points

• Constitutional provisions:
  • Article 124(4) – Removal of Supreme Court judges.
  • Article 217 – Applicable to High Court judges.
• Grounds for removal:
  • Proved misbehaviour or incapacity.
• Procedural requirements:
  • Motion signed by 100 Lok Sabha MPs or 50 Rajya Sabha MPs.
  • Inquiry under the Judges (Inquiry) Act, 1968.
  • Removal by special majority in both Houses.
• Impeachment ensures judicial accountability within constitutional limits.
• Parliament acts as a constitutional check, not an appellate authority.

Static Linkages

• Separation of powers allows checks, not isolation.
• Judicial independence is institutional, not absolute.
• Rule of Law requires accountability of all authorities.
• Basic Structure Doctrine balances independence with accountability.
• Ethical norms guided by Restatement of Judicial Values (1997).

Critical Analysis

• Constitutional Merits
  • Upholds parliamentary oversight.
  • Strengthens constitutional supremacy.
  • Addresses concerns beyond individual judgments.
  • Reinforces public confidence in institutions. Constitutional
• Concerns
  •  Risk of politicisation of impeachment.
  • Very high threshold limits effectiveness.
  • Absence of a permanent judicial oversight body.
  • Possibility of misuse affecting judicial independence.

Way Forward

• Define misbehaviour through statutory guidelines.
• Create an independent judicial complaints authority (ARC recommendation).
• Use impeachment as a last-resort mechanism.
• Encourage judicial restraint in extra-judicial activities.
• Strengthen internal accountability mechanisms within the judiciary.

NUCLEAR STEP TO ENERGY SAFETY

Context of the News

• Parliament introduced the Sustainable Harnessing and Advancement of Nuclear Energy for Transforming India (SHANTI) Bill, 2025 to accelerate nuclear power capacity and attract private and foreign investment.

Background & Need

• Nuclear energy provides reliable baseload power, unlike intermittent renewables.
• India’s nuclear share in electricity generation is ~3%.
• Targets:
  • 22.5 GW by 2032
  • 100 GW by 2047
• Expansion constrained earlier due to:
  • Closed sector structure
  • Liability concerns under CLNDA, 2010  
  • Limited private and foreign capital

Key Provisions of SHANTI Bill

• Allows up to 49% FDI in specified nuclear activities.
• Amends Civil Liability for Nuclear Damage Act, 2010:
  • Removes supplier liability clause.
  • Aligns India with international nuclear liability practice (operator-based liability).
• Provides regulatory clarity to:
  • Foreign reactor suppliers  
  • Indian sub-vendors
• Mandates safety authorisation by AERB for all nuclear entities.

Small Modular Reactors (SMRs) – Significance

• Lower capital cost than conventional reactors.  
• Shorter construction timelines.
• Enhanced safety through passive systems (automatic shutdown).
• Suitable for:
  • Distributed power  
  • Industrial clusters  
  • Grid stability
• Feature in India’s cooperation with US and Russia.

Static Concepts Linked

• Nuclear energy as a low-carbon energy source.  
• Concept of baseload power in power systems.  
• Atomic energy under Union List (Seventh Schedule).
• Three-stage nuclear programme aimed at thorium utilisation.
• Global safety strengthening post-Fukushima (2011).

Advantages

• Enhances energy security.
• Supports climate commitments and low- carbon transition.
• Attracts foreign capital and advanced technology.
• Enables India’s integration into the global nuclear value chain.
• Concerns / Challenges
  • Nuclear waste disposal and long-term storage.  
  • High initial capital investment.
  • Public safety perception and environmental risks.
  • Need for strong regulatory independence.

Way Forward

• Strengthen AERB’s autonomy and technical capacity.
• Develop a comprehensive nuclear waste management policy.
• Promote domestic manufacturing under Make in India.
• Invest in R&D for advanced reactors and SMRs.
• Ensure transparency and public trust through risk communication.