SEBI defers rollout of new mutual fund distributor incentive regime to March 1

The Securities and Exchange Board of India (SEBI) on Wednesday extended by a month the timeline for implementing its revised incentive framework for mutual fund distributors, citing operational challenges flagged by the industry.

The additional incentive structure aimed at onboarding new investors from smaller cities and women investors, scheduled to come into effect from February 1, 2026, will now be implemented from March 1, 2026, SEBI said in a circular.

The decision follows feedback from mutual funds and distributors, who pointed to difficulties in putting in place the required systems and processes for smooth implementation of the new framework.

“All other provisions of SEBI Circular dated November 27, 2025 shall remain unchanged,” the regulator said.

In November, SEBI had introduced a revised incentive mechanism to encourage financial inclusion and improve mutual fund penetration, particularly in underserved geographies.

Under the framework, distributors are eligible for additional commissions for bringing in new individual investors with fresh PANs from beyond the top 30 (B-30) cities, and new women investors with fresh PANs from both top-30 (T-30) and B-30 cities.

As per the framework, asset management companies (AMCs) will pay a 1% commission for onboarding eligible investors, capped at ₹2,000 per investor, provided the investor remains invested for at least one year.

In the case of systematic investment plans (SIPs), the incentive will apply to the total SIP instalments made during the first year, subject to the same cap.

These incentives will be paid over and above the existing trail commissions offered to distributors.

However, dual incentives will not be allowed for the same investor or investment, with distributors required to choose between the B-30 incentive and the women-investor incentive.

The additional commissions will be funded from the 2 basis points (0.02%) that AMCs are mandated to set aside annually for investor education and awareness activities.

SEBI has also clarified that exchange traded funds (ETFs), domestic fund-of-funds schemes with over 80% exposure to local funds, and schemes with durations of less than one year will not be eligible for the additional incentive.

The regulator stated that the measures have been introduced “in the interest of investors and to promote the orderly development of the mutual fund industry.”