Direct Mutual Fund Plans Become Default Option on AMC Digital Platforms

Key Takeaways

• Direct plans became the default selection on mutual fund house digital investment platforms from November 1, 2026, under SEBI's revised framework.
• Direct and regular plans of the same scheme invest in the same underlying portfolio but have different expense structures.
• The change affects the default investment selection process and does not automatically convert existing regular-plan holdings into direct plans.

Direct Plans Become Default on Digital Investment Platforms

Mutual fund investors accessing asset management company (AMC) digital platforms are now presented with direct plans as the default investment option under a revised regulatory framework introduced by the Securities and Exchange Board of India (SEBI).

The change took effect on November 1, 2026, and was highlighted in a fresh report published on November 4.

Under the revised arrangement, direct plans are pre-selected when investors initiate eligible mutual fund transactions through AMC digital channels.

Investors wishing to invest through regular plans must make that selection separately, with appropriate information about the associated costs.

The change is intended to improve transparency in the mutual fund purchase process.

Difference Between Direct and Regular Mutual Fund Plans

Direct and regular plans are two investment routes available within the same mutual fund scheme.

Both plans invest in the same underlying portfolio and follow the same investment objective.

The primary distinction is their expense structure.

Regular plans include expenses associated with distributor commissions, whereas direct plans do not carry these distribution commissions.

As a result, direct plans generally have lower expense ratios than the corresponding regular plans.

The difference in expenses can result in different net asset values and returns over time, even though the underlying securities are identical.

The actual cost difference varies between schemes.

What Changes for Investors?

The revised digital interface changes the initial plan selection displayed during the investment process.

Previously, investment platforms could present plan choices differently depending on their operating arrangements.

Making direct plans the default reduces the possibility of investors selecting a higher-cost plan without recognising the distinction.

However, the default selection does not prevent investors from accessing regular plans through permitted channels.

Neither does the rule automatically convert units already held in regular plans into direct-plan units.

Existing holdings continue under their respective plan arrangements unless investors initiate a separate transaction.

Mutual Fund Distribution Framework

The development forms part of SEBI's efforts to improve cost disclosure and transparency within mutual fund distribution.

The framework retains the distinction between distributor-assisted investments and direct investments made without distributor commissions.

The financial difference between the two plan types depends on the applicable total expense ratios and the period for which investments remain in the scheme.

The November implementation represents a change to the digital investment process rather than a change in the underlying portfolios managed by fund houses.