Sebi Rolls Out Fresh Incentives to Boost Mutual Fund Distributor Participation

For countless everyday savers across India, the journey into mutual fund investing often begins with a simple conversation — usually with a trusted distributor. But in smaller towns and among women investors, this first step is still missing for many.

Understanding this gap, Sebi has introduced a fresh set of incentives aimed directly at mutual fund distributors, rewarding them for bringing more first-time investors into the financial ecosystem. This move is not just a regulatory update — it’s an effort to make investing more inclusive, more personal, and more accessible to households that need guidance the most.

What Sebi’s New Incentive Framework Offers

Sebi’s revised model introduces additional commissions for distributors who successfully onboard:

• New investors from B-30 cities, and
• New women investors from any city in India.

Distributors will now be able to earn:

• 1% commission on the first lump-sum investment, capped at ₹2,000 — provided the investor stays invested for at least a year.
• 1% commission on new SIP registrations, also capped at ₹2,000 with a one-year minimum tenure.

These payouts come in addition to existing trail income, offering distributors a stronger reason to reach new investors and expand India’s mutual fund base.

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Schemes That Will Not Qualify

To ensure the incentives promote long-term investing, Sebi has excluded certain categories:

• Exchange-Traded Funds (ETFs)
• Domestic fund-of-funds with 80%+ allocation to Indian schemes
• Ultra-short maturity products, such as:
  • Overnight, Liquid, Ultra-Short Duration, and Low-Duration funds

This aligns with Sebi’s long-held view that incentives should encourage sustained participation, not short-term movements.

Guardrails to Prevent Misuse

Sebi has added strict protections to keep the system clean:

• No dual incentives — a distributor cannot claim both B-30 and women-investor incentives for the same individual.
• Commissions will come from existing 2 basis points set aside by AMCs for investor education and financial inclusion.
• Clawback rules will apply if the investor exits before the required one year.

By adding these safeguards, Sebi aims to prevent the misuses that surfaced under the older B-30 incentive model.

Why This Is Important for Distributors

Distributors in smaller towns often perform far more groundwork than their metro counterparts — from assisting with KYC to helping first-time investors understand basic concepts. These tasks take time, travel and personal effort. The new incentives acknowledge these challenges and reward distributors for real, meaningful outreach.

And the impact is already visible:

• B-30 cities contributed 19% of total MF assets in September 2025
• AUM from these cities rose to ₹14.50 trillion, up from ₹14.14 trillion in August
• Marking 2.6% monthly growth and 15% growth year-on-year

This makes B-30 regions one of the strongest engines of mutual fund expansion — a trend Sebi clearly intends to support.

Industry Reaction: Positive and Hopeful

Financial experts have welcomed Sebi’s move with optimism. With a three-month transition window, the industry is now preparing systems and processes for the new framework, which goes live on 1 February 2026.

Conclusion

Sebi’s new incentive model marks a significant step toward deepening mutual fund participation in India. By motivating distributors and safeguarding investors, the regulator has built a system that supports growth where it matters most — in smaller cities and among women who are just beginning their investment journeys.

This is not just a policy change. It is a path to wider financial inclusion.

Disclaimer:

This article is created for news and informational purposes only, based entirely on publicly available documents and reports. It does not include any financial advice. Readers are encouraged to verify details independently before making investment decisions.