What’s the story
The Securities and Exchange Board of India (SEBI) has announced a revamped incentive structure for mutual fund distributors.
The move is aimed at encouraging financial inclusion by incentivizing the onboarding of first-time investors from smaller cities and women across the country.
The new framework will come into effect on February 1, 2026, according to a circular issued by SEBI on Thursday.
New framework replaces previous one
The new framework replaces the earlier one that governed incentives for investments from beyond the top 30 cities (B-30 cities).
This was under Regulation 52(6A)(b) of SEBI (Mutual Funds) Regulations, 1996.
The earlier rule was revoked via a gazette notification dated October 31, 2025, after industry concerns over possible misuse and inconsistent implementation.
Revised framework aims for financial inclusion
The revised framework is not just a fix for the earlier model’s flaws, but also a shift toward broader financial inclusion.
It will only classify investors based on new PAN registrations at the mutual fund industry level, ensuring incentives are given to genuine first-time investors.
Under the new guidelines, distributors will now be eligible for additional commissions when onboarding new individual investors from B-30 cities and new women investors from any city.
AMCs to fund additional commissions
Asset management companies (AMCs) will pay these additional commissions from the two basis points they are already required to set aside for investor education and financial inclusion.
For lump-sum investments, the additional commission will be 1% of the first application amount, up to ₹2,000, payable only if the investor stays invested for at least a year.
For systematic investment plans (SIPs), it will be 1% of total contributions made in the first year, also capped at ₹2,000.
SEBI clarifies on dual incentives and scheme exclusions
To prevent overlap and misuse, SEBI has clarified distributors cannot claim more than one incentive for the same investor/investment.
However, they can claim incentives for new women investors from top-30 cities if the B-30 incentive hasn’t been claimed for that investor.
The circular also said while payment is mandatory for most schemes, it won’t apply to exchange-traded funds (ETFs), domestic fund-of-funds with over 80% assets in other domestic funds, and categories with a duration requirement of less than one year.
Implementation guidelines
AMFI to issue detailed implementation standards
To ensure uniform adoption, SEBI has directed the Association of Mutual Funds in India (AMFI) to issue detailed implementation standards within 30 days.
Any changes made to scheme offer documents reflecting the revised incentive structure won’t be treated as fundamental attribute changes, sparing mutual funds from more complex compliance procedures.
The new framework aims at encouraging long-term, meaningful investor participation rather than short-term or institutional-driven flows.