SEBI Revamps MF Distributor Incentives to Boost B-30 Cities and Women Investors

Circular no. HO/(83)2025-IMD-POD-1/I/152/2025; Dated: 27.11.2025

1. Background – Earlier Incentive Framework under Regulation 52(6A)(b)

Regulation 52(6A)(b) of the SEBI (Mutual Funds) Regulations, 1996 originally allowed mutual fund distributors to earn incentives for bringing new investments or inflows from beyond the top 30 cities (B-30 cities). The intention was to deepen mutual fund penetration in underserved regions.

However, over time, SEBI identified concerns about misuse of this framework, prompting the need for a more transparent and efficient model.

2. Need for Revision and Industry Feedback

Based on inputs received from market participants and observations of the earlier system’s shortcomings, SEBI decided to introduce a revised incentive structure.

The updated framework aims to:

• Address loopholes that allowed misuse of earlier incentives,
• Improve fairness and transparency, and
• Encourage distributors to expand mutual fund reach among genuinely new investors.

3. Revised Incentive Framework – Focus on New Investors

The new framework offers additional incentives to distributors for bringing in:

1. New individual investors from B-30 cities, and
2. New women investors, regardless of whether they reside in T-30 or B-30 cities.

This dual focus is intended to both widen geographic participation and enhance financial inclusion among women.

4. Investor Classification Based on PAN Registration

To ensure authenticity, SEBI has mandated that investors will be identified solely through new PAN registrations at the mutual fund industry level.

This eliminates duplication and ensures incentives are available only when distributors bring in genuine first-time investors, not existing or re-activated ones.

5. Eligibility and Calculation of Additional Commission

5.1 For Lump-Sum Investments

• Distributors will receive 1% of the first application amount.
• The incentive is capped at ₹2,000 per investor.
• The commission is payable only if the investor stays invested for at least one year.

5.2 For Systematic Investment Plans (SIPs)

• Distributors will earn 1% of the total SIP contributions made during the first year.
• Incentive capped at ₹2,000 per investor.

These incentives are over and above the existing trail commissions normally payable to distributors.

6. Effective Date

The revised incentive framework will come into effect from 01.02.2026.