New Delhi, Jan. 21 -- India's mutual fund industry body is in discussions with the markets regulator to reduce certain fixed or non-variable costs borne by mutual funds, as these charges do not decline with growth in assets and continue to weigh on profitability, said three people familiar with the matter.

Costs such as know your customer (KYC) charges and depository fees are largely fixed in nature since they are levied on each onboarded investor. In addition, there are fixed transaction platform charges. All of these remain the same regardless of the size of assets managed. This creates a structural mismatch at a time when mutual fund expense ratios fall as assets grow, squeezing margins for fund houses.

Expense ratio, charged as a pe...