The Securities and Exchange Board of India (Sebi) has granted a one-month extension for the rollout of a revised incentive structure aimed at mutual fund distributors. The new deadline for implementation is now March 1, 2026, as per a circular issued on Wednesday. This move provides asset management companies (AMCs) with additional time to establish the necessary systems and processes.
What is the Revised Incentive Framework?
The core objective of the revamped framework is to broaden the investor base in India's mutual fund industry. It specifically aims to encourage the onboarding of new individual investors from B-30 cities and new women investors from all cities, including the top 30. B-30 cities refer to locations beyond the top 30 cities as classified by the mutual fund industry.
Under this structure, distributors will be eligible for an additional commission of 1% on the first lump-sum investment or the first-year Systematic Investment Plan (SIP) amount. This incentive is capped at Rs 2,000 per eligible investor, provided the investor stays invested for a minimum of one year.
Key Conditions and Exclusions
The additional commission will be paid over and above the existing trail commissions. Sebi has clarified that the funds for this incentive will come from the 2 basis points already allocated by AMCs for investor education purposes. However, the regulator has built in safeguards to prevent misuse.
No dual incentives will be permitted for the same woman investor hailing from a B-30 city. Furthermore, the extra commission will not apply to certain investment products. These exclusions cover Exchange-Traded Funds (ETFs), specific fund-of-funds schemes, and very short-duration products like overnight, liquid, ultra-short, and low-duration funds.
Reason for the Extension and Industry Impact
The decision to push the implementation date from the original February 1, 2026, to March 1, 2026 was taken after Sebi considered feedback from the industry. Stakeholders had highlighted potential operational challenges in ensuring a smooth and seamless rollout of the new incentive mechanism.
This extension is seen as a pragmatic step by the regulator, allowing AMCs and distributors adequate time to adapt their backend systems, compliance protocols, and training modules. It reflects Sebi's intent to balance the goal of expanding retail participation with the practical realities of the market's operational framework.
The revised incentive structure replaces an earlier model that aimed to boost investments from beyond the top 30 cities. Sebi decided to refine the framework to better align it with the core objective of inclusive growth in the mutual fund ecosystem while incorporating necessary safeguards based on industry consultation.
