Every mutual fund charges an expense ratio to cover management, administration, marketing and (in regular plans) distributor commissions. A 1% expense ratio means roughly ₹1 is deducted every year for every ₹100 of assets.
Because the deduction happens inside the fund, you never write a separate cheque for it — but it still reduces the return that reaches you. Over 15–20 years the difference between a 0.5% and a 1.5% expense ratio can be substantial.
Expense ratio is one factor among many. A slightly higher-cost fund with a consistent process and suitable risk profile can still be the better choice for a particular goal. Always read the scheme documents.