Mumbai: Markets regulator Securities and Exchange Board of India (Sebi) has extended the deadline for implementing the new additional incentives structure for mutual fund (MF) distributors to March 1, 2026. Earlier, the revised framework was scheduled to come into force from February 1, 2026.
The decision was taken after Sebi received feedback from the mutual fund industry highlighting operational challenges in setting up systems and processes required for smooth implementation.
Who the incentives are meant for?
The new incentive structure is aimed at encouraging mutual fund distributors to bring more first-time investors into the market. It focuses on two specific groups:
- New individual investors from B-30 cities
- New women investors from any city
In the mutual fund industry, B-30 cities refer to locations beyond India’s top 30 cities. These regions are seen as having large untapped potential but lower awareness and participation in mutual fund investments.
How the incentive structure will work?
Under the revised framework, asset management companies (AMCs) will pay distributors an additional incentive equal to 1 per cent of the investor’s first lump-sum investment or the first-year SIP amount. However, this incentive will be capped at Rs 2,000 per investor.
To qualify, the investor must remain invested for at least one year. The incentive will be paid over and above the existing trail commission that distributors already receive.
Importantly, this payment will come from the 2 basis points already earmarked by AMCs for investor education and awareness, and not from any new charges.
Key restrictions and exclusions
Sebi has also laid down clear restrictions to prevent misuse. Distributors will not be allowed to claim dual incentives for the same woman investor from a B-30 city. Additionally, the extra commission will not apply to certain products, including exchange-traded funds (ETFs), specific fund-of-funds schemes, and very short-term schemes such as overnight, liquid, ultra-short duration and low-duration funds.
Why Sebi revised the framework?
Earlier, Sebi had introduced incentives for attracting investments from B-30 cities. However, concerns were raised about possible misuse of the scheme. Based on industry feedback, the regulator decided to revise the structure to focus strictly on new investors and improve transparency.
By extending the deadline, Sebi aims to give AMCs and distributors enough time to prepare systems and ensure proper implementation.
