Sebi revives B-30 incentives for mutual funds with ₹2,000 payout cap

Sebi allows mutual funds to pay incentives to distributors for new investors from beyond top 30 cities and first-time women investors, capped at Rs 2,000

The Securities and Exchange Board of India (Sebi) on Friday announced the reintroduction of incentives for mutual fund (MF) distributors to enhance MF penetration in smaller towns and villages.

 

Following its board meeting, the regulator said fund houses would be allowed to incentivise distributors for bringing in new investors from areas beyond the top 30 cities (B-30).

 

The incentive will be 1 per cent of the first investment made by the investor in the case of lumpsum investments. For investors starting with a systematic investment plan (SIP), the incentive will be 1 per cent of the total investments in the first year. The payout will be subject to a ceiling of Rs 2,000.

 

The incentive framework will also cover distributors bringing in first-time women investors from top cities. 

 

“Considering the scope of gender inclusion in the MF space, it was decided to incentivise 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 B-30 incentives,” Sebi said in a release.

 

The new framework replaces the earlier incentive structure, which was in place until March 2023. Under that system, MFs could charge up to 30 basis points over and above the expense ratio if a certain portion of their assets came from B-30 regions. These incentives were typically passed on to distributors bringing in assets from smaller towns and villages.

 

The regulator had suspended the incentives due to misuse by some distributors through transaction splitting and investment churning.