A ₹2,000 reward: Sebi's new plan to turbocharge MF reach in smaller cities

Under this, AMCs will pay these distributors 1 per cent of the first lump-sum investment or the first-year SIP amount, up to Rs 2,000, provided the investor stays invested for at least a year.

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In a push to expand mutual fund penetration and make investing more inclusive, market regulator Sebi on Thursday announced a new incentive structure for mutual fund distributors, offering additional payouts for bringing new individual investors from B-30 cities and new women investors from anywhere in India.

 

The framework will come into effect on February 1, 2026, Sebi said in a circular.

 

Under the new system, mutual fund distributors will receive:

 

• 1% of the first lump-sum investment, or
• 1% of the first-year SIP amount,
• Capped at Rs 2,000 per investor,
• Only if the investor stays invested for at least one year.
• This incentive will be paid over and above the existing trail commission.
• Importantly, the payout will not come from investor funds, but from the 2 basis points (0.02%) that AMCs already set aside for investor education.

 

Who Qualifies for the Incentive?

 

Sebi has clearly defined the eligible categories:

 

1. New Individual Investors (New PAN) from B-30 Cities

Distributors will earn the incentive for onboarding entirely new investors from beyond the top 30 cities (B-30).

 

2. New Women Investors (New PAN) from Any City

 

Applies to women investors across both top 30 and B-30 cities, reflecting Sebi’s push toward gender inclusion in financial markets.However, no dual incentives will be allowed for the same woman investor in a B-30 city. Distributors must choose one incentive path.

 

What Does Not Qualify?

 

The additional commission will not apply to:

 

• Exchange-traded funds (ETFs)
• Fund of Funds investing primarily in overseas ETFs
• Overnight funds
• Liquid funds
• Ultra-short duration and low-duration schemes

 

Sebi has excluded these categories to avoid incentives being misused for low-risk, low-duration products not aligned with long-term investor education.

 

Why the New Structure?

 

Sebi is revising the incentive framework after industry feedback flagged misuse of the earlier B-30 incentive scheme.

 

The earlier system rewarded distributors for new investments from B-30 locations, but Sebi observed issues such as:

 

• Churning money between schemes to claim incentives
• Superficial “new” inflows that did not translate into sustained participation
• By linking incentives to new PAN-based investors who stay invested for at least 12 months, Sebi aims to:
• Encourage genuine investor onboarding
• Improve long-term participation
• Promote sustainable growth in mutual fund penetration

 

The mutual fund industry body AMFI will issue detailed implementation guidelines within 30 days.

 

Sebi also clarified that any changes to scheme documents to introduce this new structure will not be treated as a fundamental attribute change—meaning unitholders will not need to be notified for exit options.