SEBI's Direct Mutual Fund Plan Default Rule Takes Effect From November 2026

Key Takeaways

• SEBI's requirement for AMCs to display direct mutual fund plans as the default option on their digital platforms took effect on 1 November 2026.
• Regular plans remain available, allowing investors to continue using mutual fund distributors.
• The revised digital presentation makes lower-cost direct plans more prominent while preserving the choice between direct and regular investments.

Direct Plans Become the Default on AMC Digital Platforms

Investors accessing mutual fund schemes through asset management company websites and mobile applications are now presented with direct plans as the default investment option under a regulatory change effective from 1 November 2026.

The Securities and Exchange Board of India (SEBI) introduced the requirement to make the distinction between direct and regular mutual fund plans clearer during the digital investment process.

The rule affects how schemes are displayed and selected on AMC-owned platforms. It does not discontinue regular plans or require existing regular-plan investors to move their investments.

What Changed From 1 November?

Previously, investors using an AMC's digital platform could encounter direct and regular plans through different selection processes, depending on the fund house and its interface.

Under the revised requirement, the direct plan must be presented as the default option.

Regular plans remain accessible for investors who choose to transact through distributors.

The regulator has also emphasised disclosure of the higher costs associated with regular plans, helping investors distinguish between the two arrangements before completing transactions.

Direct and Regular Plans Have Different Cost Structures

Direct and regular plans generally invest in the same underlying portfolio and follow the same investment objective within a mutual fund scheme.

Their primary difference lies in distribution arrangements and expenses.

Direct plans do not include distributor commissions in their expense structure, resulting in lower expense ratios than their corresponding regular plans.

Regular plans incorporate distribution-related costs, which are reflected in their total expense ratios.

According to AMFI data cited in an Economic Times report, expense ratios across regular plans ranged from 0.36% to 4.3%, compared with 0% to 2.7% for direct plans. These are industry-wide ranges across different schemes, rather than a comparison of matching plans within one scheme.

Existing Investments Remain Unaffected by the Default Setting

The change concerns the selection process on AMC digital platforms.

An existing regular-plan holding does not automatically convert into a direct-plan investment simply because the new default has been introduced.

Investors may continue to access regular plans where available and select their preferred distribution arrangement.

The regulatory change is part of SEBI's broader emphasis on fee transparency and clearer digital disclosures in the mutual fund industry.

By changing the default option rather than eliminating a product category, the framework seeks to ensure that investors can identify the available plan structures and their associated expenses before investing.