On 27-11-2025, the Securities and Exchange Board of India (‘SEBI’) circulated a notification revising the incentive structure for mutual fund distributors. To encourage outreach and awareness among new investors, SEBI has planned to provide additional incentives to distributors for onboarding new individual investors from the top 30 cities (B-30 cities) and Women investors, effective from 1-2-2026.
Key Takeaways:
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This move came after the omission of Regulation 52(6A) (b) of the SEBI (Mutual Funds) Regulations, 1996, which earlier allowed distributors to earn additional incentives for mobilizing investments from beyond B-30 cities.
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The earlier framework was found to be prone to misuse, and based on industry feedback, SEBI decided to replace it with a more structured and transparent mechanism.
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SEBI has introduced under Regulation 52(4A), a new framework aims to encourage distributors to expand their outreach and create awareness among new investors, particularly those from smaller cities and women investors across the country.
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Under the revised structure, distributors will earn additional commission for onboarding new investors with fresh PANs from B-30 cities and new women investors from both Top-30 and B-30 cities.
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Distributors will receive an additional commission of 1% of the first application amount for lump sum investments, capped at ₹2,000, provided the investor remains invested for at least one year.
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For systematic investment plans (SIPs), they will earn 1% of the total investment made during the first year, also capped at ₹2,000.
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These incentives will be funded from the two basis points on daily net assets that asset management companies (AMCs) are mandated to set aside annually for investor education, awareness, and financial inclusion, with claw back provisions to ensure accountability.
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The commission is payable over and above the trail commission, but dual incentives for the same investor or investment are not permitted.
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SEBI has also specified that certain schemes will not be eligible for these additional commissions, including Exchange Traded Funds (ETFs), domestic Fund of Funds with more than 80% of assets invested in domestic funds, and short-duration schemes such as overnight funds, liquid funds, ultra-short duration funds, and low-duration funds.
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To ensure smooth and uniform implementation, SEBI has directed the Association of Mutual Funds in India (‘AMFI’), to issue detailed implementation standards within 30 calendar days of the circular.
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Furthermore, any changes made to offer documents pursuant to this revised incentive structure will not be considered a fundamental attribute change, thereby simplifying compliance for AMCs.