SEBI Makes Direct Mutual Fund Plans Default on AMC Digital Platforms From November 1

Key Takeaways

SEBI has announced that direct mutual fund plans will become the default option on asset management companies' digital platforms from November 1, 2026.

Investors selecting regular plans will need to be informed that these plans carry higher expense ratios than their direct-plan counterparts.

The announcement is intended to improve transparency in mutual fund distribution by making plan costs clearer during the investment process.

Body

The Securities and Exchange Board of India (SEBI) has announced a change in how mutual fund investment options will be presented on asset management companies' digital platforms. From November 1, 2026, direct plans will become the default selection, while investors choosing regular plans must be informed about their higher expense ratios.

SEBI Chairman Tuhin Kanta Pandey announced the measure on October 28, placing mutual fund distribution transparency among the regulator's investor-protection priorities.

The change concerns the default option displayed to investors on AMC-operated digital platforms. It does not eliminate regular plans or make direct plans compulsory.

What Changes From November 1?

Mutual fund schemes commonly offer direct and regular plans. Both invest through the same underlying scheme portfolio, but their distribution costs differ.

Direct plans do not include distributor commissions in the same way as regular plans and consequently have lower expense ratios for the corresponding scheme.

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

Under the announced arrangement, investors accessing an AMC's digital platform will see the direct plan as the default option. Those selecting a regular plan must receive information about the higher expenses associated with that choice.

The measure therefore changes the presentation of investment options rather than the underlying investment objective or portfolio of a mutual fund scheme.

Greater Visibility Into Mutual Fund Costs

Expense ratios represent the recurring costs charged to a mutual fund scheme. These expenses are reflected in the scheme's net asset value and can affect the returns received by investors.

Although direct and regular plans of the same scheme hold substantially the same investments, their NAVs and historical returns differ because of their respective expenses.

Making the cost difference visible at the point of selection is intended to help investors understand the financial implications of their chosen plan.

The announcement also reflects SEBI's wider emphasis on investor awareness, digital access and transparency in financial products.

What Investors Should Know

The November 1 change applies to the default selection on AMC digital platforms. It should not be interpreted as a prohibition on regular-plan investments or as an automatic conversion of existing holdings.

Investors may continue to encounter both plan structures, subject to the applicable platform and scheme arrangements.

The practical change is that the lower-cost direct plan will become the starting option on the affected digital interfaces, while choosing a regular plan will involve an additional cost disclosure.

The announcement adds a new transparency requirement to India's mutual fund distribution framework without changing the underlying market risks associated with mutual fund investments.