In a significant move for India's financial markets, the Securities and Exchange Board of India (Sebi) has granted a one-month extension for the rollout of a new incentive framework designed for mutual fund distributors. The capital markets regulator announced on Wednesday, January 7, 2026, that the revised deadline for implementation is now March 1, 2026.
What Prompted the Extension?
The decision to push the effective date from the originally scheduled February 1, 2026, came after Sebi considered feedback from the mutual fund industry. Key stakeholders cited operational difficulties in establishing the necessary systems and processes required for a smooth launch of the additional incentive structure. The extension aims to provide adequate preparation time for all parties involved.
Details of the New Incentive Structure
The core objective of this initiative is to promote wider outreach and investor awareness, specifically targeting two key demographics. Distributors will earn an extra commission for onboarding:
- New individual investors (with a new PAN) from locations classified as B-30 cities. In mutual fund parlance, B-30 refers to all cities and towns beyond the top 30 metropolitan areas.
- New women individual investors (with a new PAN) from both the top 30 cities and B-30 locations.
Under the new framework, Asset Management Companies (AMCs) will pay distributors 1% of the first lump-sum investment or the first-year Systematic Investment Plan (SIP) amount, subject to a cap of ₹2,000. This incentive is contingent on the investor remaining invested for a minimum of one year.
Funding Source and Key Exclusions
The additional commission will be drawn from the existing pool of 2 basis points that AMCs already allocate for investor education purposes. It is important to note that this payment will be made over and above the regular trail commissions that distributors receive.
However, Sebi 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 several categories, including:
- Exchange-Traded Funds (ETFs)
- Specific Fund of Funds (FoFs)
- Very short-duration schemes like overnight, liquid, ultra-short, and low-duration funds.
This revised structure replaces an earlier framework that focused solely on inflows from B-30 cities. The regulator decided to overhaul the model after receiving industry feedback highlighting potential misuse, leading to the current, more targeted approach that also emphasizes inclusion of women investors nationwide.
The extension provides mutual fund distributors and AMCs a crucial window to align their operational backend with Sebi's vision of deepening market penetration and fostering inclusive growth in India's investment landscape.
