Mutual fund distributors will now earn additional incentives for bringing in first-time investors from B-30 (beyond the top 30) cities and for onboarding new women investors from any city, as the Securities and Exchange Board of India (Sebi) has introduced a revised incentive framework.
Distributors will be eligible for a commission of 1% on the first application, capped at ₹2,000 for lump-sum investments, provided the investor remains invested for at least one year, and 1% on systematic investment plans (SIPs), subject to the same cap, the market regulator said in a circular on Thursday.
The incentive will be paid in addition to the trail income earned by distributors from mutual fund schemes, the circular added.
While the incentive will apply to all mutual fund schemes, Sebi has carved out specific exceptions. Exchange-traded funds (ETFs), domestic fund-of-funds schemes with more than 80% of their assets invested in domestic funds, and schemes with a duration requirement of less than one year, including overnight, liquid, ultra-short duration, and low-duration funds, will not qualify.
The exclusions are consistent with Sebi’s long-held position that distributor incentives should be aligned with long-term participation.
The regulator, along with the Association of Mutual Funds in India (Amfi), will issue detailed implementation standards within 30 calendar days.
The revised final framework will come into effect on 1 February 2026, giving the industry a three-month window to update their systems, documentation and internal processes.
The goal
The regulator, which asked to stop B-30 incentives as they were being misused in 2023, said the changes have been made “in the interest of investors and to promote the orderly development” of the mutual fund industry.
To be sure, in its September board meeting, Sebi approved a 1% commission with a cap of ₹2,000 and expanded its scope to include women investors. The Thursday circular provides structure to the incentive framework, formalizing it for the industry.
It said industry feedback indicated that the framework had, over time, led to practices that were not aligned with the original intent of increasing penetration.
The Thursday circular, however, introduced guardrails to prevent misuse, such as dual incentives. “Distributors shall be eligible to receive the additional commission for mobilizing investments from new women investors from the top 30 cities, and in cases where the commission for new investment from B-30 cities has not been claimed for the same woman investor/investment. Dual incentives for the same investor/investment shall not be permitted,” the circular said.
The additional commission will be funded from the two basis points of daily net assets that asset management companies (AMCs) are already required to earmark each year for investor education, awareness, and financial inclusion, and will be subject to appropriate clawback provisions.
“It is a very welcome move by Sebi to understand that you have to feed where the growth is coming from,” said Santosh Joseph, founder at investment advisory firm Germinate Investor Services. “The incentive is rehashed and very well guarded”.
In smaller cities, the distributor often has to visit the investor and manually fill out the details, incurring additional costs. The incentives push them to take the task at hand.
B-30 locations accounted for 19% of the industry’s assets in September 2025. AUM from these centres rose to ₹14.50 trillion from ₹14.14 trillion in August, marking a 2.6% month-on-month increase and a 15% rise over the year, according to a report by Icra Analytics, citing data from Amfi.