On November 27, 2025, SEBI issued an important circular that reshapes how mutual fund distributors are incentivized for bringing in new investors—specifically from Beyond Top 30 (B-30) cities and among women investors across India. This move marks a shift from the earlier framework under Regulation 52(6A)(b), which has now been removed due to concerns of misuse and inefficiencies. The new structure, introduced under Regulation 52(4A), focuses on responsible expansion, investor awareness, and financial inclusion.
Why the Change?
Previously, distributors received incentives for generating new investments from B-30 cities. While well-intentioned, this system faced challenges, including potential misuse and inconsistencies in actual investor onboarding. After receiving industry feedback, SEBI removed the old regulation via a gazette notification dated October 31, 2025, paving the way for a more targeted and transparent incentive model.
What’s New?
SEBI’s revised framework continues to encourage the expansion of mutual fund penetration—but with clearer rules and sharper focus. Here’s what has changed:
1. Who Qualifies for the New Incentives?
Distributors will now receive additional commissions for onboarding two categories of new investors:
a. New Individual Investors from B-30 Cities
- Identified at the mutual fund industry level using new PANs.
- Designed to deepen financial inclusion in underpenetrated regions.
b. New Women Investors Across All Cities (T-30 and B-30)
- A major step toward gender-inclusive investing.
- Applies to women investors registering a new PAN in the mutual fund ecosystem.
2. Incentive Structure: How Much Commission Can Distributors Earn?
SEBI has clearly defined the commission payout for eligible new investments:
a. Lump Sum Investments
- 1% of the first application amount, capped at ₹2,000.
- Investor must stay invested for at least one year.
b. Systematic Investment Plans (SIPs)
- 1% of the total investment made during the first year.
- Also capped at ₹2,000.
These payouts are over and above the regular trail commission, ensuring distributors remain motivated to expand the investor base sustainably.
3. Source of the Commission
The additional commission will be funded from:
- The 2 basis points (0.02%) that AMCs are required to allocate annually toward investor education, awareness, and financial inclusion.
SEBI has mandated the inclusion of clawback provisions to ensure that incentives are not misused and remain tied to genuine investor participation.
Why This Matters
This circular represents a balanced approach—promoting market expansion while safeguarding investor interests. By encouraging investments from B-30 cities and women, SEBI aims to:
- Reduce geographic concentration of mutual fund assets
- Improve financial penetration across India
- Empower women as independent financial decision-makers
- Strengthen the long-term sustainability of the mutual fund distribution network
Final Thoughts
SEBI’s revised incentive framework is not just a regulatory update—it’s an important step toward democratizing access to financial products in India. By rewarding distributors for meaningful onboarding of new and diverse investors, the industry moves closer toward a more inclusive and well-informed investor base. For distributors, this is a timely opportunity to expand their reach with clarity and compliance. For investors, it opens doors to better awareness and participation in mutual funds.