SEBI slashes exit load cap on MFs from 5% to 3%

The SEBI approved proposals facilitating enhanced investor protection and financial inclusion in the mutual fund space. The SEBI in its board meeting approved the following proposals:

The exit load on MFs reduced from 5% to 3%. The present regulatory framework for Mutual Funds (MFs) permits mutual fund schemes to charge a maximum exit load of 5%, which gets credited back to the scheme. However, Mutual Funds generally charge exit loads in the range of 1% to 2%. Hence, reducing the maximum exit load would align the regulatory requirement with the prevailing industry practice. Setting the maximum cap at 3% was found appropriate so as to strike a better balance between investor protection and flexibility for schemes having exposure to less liquid securities.

Regarding the incentive to the distributors for inflows from B-30 cities, it has been decided to revise the incentive structure and provide incentive to distributors only for investment/inflows from new individual investors (new PAN) from B-30 cities. The incentive will be provided to the distributor for new investor at the industry level and such incentive shall be capped at 1% of the first application amount (in case of lumpsum investment) or total investment during the first year (in case of SIP) subject to a maximum of INR 2000/-.

Considering the scope of gender inclusion in the Mutual Fund space, it was decided to incentivize distributors to create awareness and promote financial inclusion among women investors. Additional commission shall be paid to distributors for investment/inflows from new women individual investors (new PAN) at the industry level. The computation and payment of such commission shall be on the same lines as for B-30 incentive.

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