SEBI’s new mutual fund incentive regime to reward distributors; Who qualifies, how much is paid

Markets regulator SEBI on Thursday introduced a revised incentive framework for mutual fund distributors, under which they will receive additional commissions for onboarding new investors from beyond the top 30 (B-30) cities as well as women investors across the country.

In a circular issued on Thursday, the Securities and Exchange Board of India (SEBI) stated that it has deleted the earlier provision governing incentives for B-30 inflows following concerns of misuse raised by the industry.

However, to continue encouraging financial inclusion and improve mutual fund penetration, especially in underserved geographies, SEBI has permitted distributors to earn additional commissions for bringing in new investors.

What’s new in the incentive regime?

According to the circular, distributors will now be eligible for incentives for two categories of new investors:

(a) new individual investors with fresh PANs from B-30 cities at the mutual fund industry level, and

(b) new women investors (new PANs) from both top-30 and B-30 cities.

How much commission can distributors earn?

Under the revised structure, asset management companies (AMCs) will pay 1% commission for onboarding eligible investors, capped at ₹2,000, provided the investor stays invested for at least a year.

For systematic investment plans (SIPs), the 1% commission will apply on the total SIP instalments made during the first year, subject to the same limit.

These incentives will be paid in addition to the existing trail commissions currently offered to distributors.

However, dual incentives for the same investor or investment will not be permitted. Distributors can claim either the B-30 incentive or the women-investor incentive, but not both.

Where will the money come from?

The additional commissions will be funded from the 2 basis points (0.02%) that asset managers are already required to set aside annually for investor education and awareness initiatives.

Are there exclusions?

Yes. The circular specifies categories that will not qualify for the additional commission.

These include Exchange Traded Funds (ETFs), domestic Fund-of-Funds schemes with more than 80% of their assets in local funds, and schemes with durations shorter than one year, such as overnight, liquid, ultra-short duration and low-duration funds.

The new framework will come into effect from February 1, 2026.

The Association of Mutual Funds in India (AMFI), in consultation with SEBI, will issue detailed operational guidelines within 30 days.

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.”