India’s markets regulator is planning to allow a new mutual fund scheme in which asset managers’ fees will be tied in part to performance, according to an official document seen by Reuters and a person with direct knowledge of the matter.

As part of the proposal, the Securities and Exchange Board of India (SEBI) wants to allow additional fees if funds consistently outperform the relevant benchmark and deliver higher annualised returns, according to an internal SEBI document.

Proposals to introduce performance-linked fees to selected mutual fund schemes have not been previously reported. Under the plan, the base fee currently charged on mutual funds would be reduced, and additional fees would be based on performance.

If introduced, India would be one of the few major markets to introduce performance-linked fees for mutual funds.

“The regulator is considering the proposal because it has observed many actively managed funds failing to outperform their benchmark indexes,” said a person with direct knowledge of the matter.

“The option of additional fees may incentivise the fund to deliver better returns,” the source said. Past performance will judge whether the fund has outperformed the chosen benchmark.

The people said the proposal had been referred to SEBI’s mutual funds panel to work out its implementation.

Typically, such proposals are sent to an internal group for consideration and public feedback before SEBI decides.

The proposed changes are part of a sweeping review of what India’s Rs 39.46 trillion ($480.26 billion) asset management industry currently charges its investors. SEBI chairman Madhabi Puri Buch said on March 28 that fees charged by mutual funds need to be transparent.

Currently, Indian asset managers can impose a fee known as the gross expense ratio, which ranges from 0-2.25% of the investment amount. This fee includes the total costs associated with managing the fund.

Regions have allowed fund houses to charge additional marketing fees and incentivised intermediaries to attract more investors to mutual fund schemes in India’s tier-2 and tier-3 cities.

However, SEBI found some misconduct during its inspection of 44 asset managers in India, including charging incentive fees to the same investors by different funds, according to the previously cited documents.

To curb this, SEBI will only allow funds to charge additional fees on investors’ first purchase of any mutual fund, the document showed.