SEBI's Direct Mutual Fund Plan Default Takes Effect From November 1, 2026

Key Takeaways

Direct mutual fund plans became the default option on asset management companies' digital platforms from November 1, 2026, under the framework announced by SEBI.

Investors selecting regular plans must be informed about the higher expense ratios associated with those plans.

The change affects the presentation of mutual fund investment options on AMC platforms and does not eliminate the availability of regular plans.

Direct Plans Become the Default Option on AMC Platforms

Direct mutual fund plans became the default selection on asset management companies' digital investment platforms from November 1, 2026.

The change was outlined by Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey during a public discussion in late October.

Under the announced framework, investors using AMC digital platforms will encounter direct plans as the default option when choosing how to invest in mutual fund schemes.

Regular plans remain available, but investors selecting them must be informed about the higher expenses associated with that option.

The change is intended to make the cost distinction between direct and regular mutual fund plans more visible during the investment process.

Difference Between Direct and Regular Mutual Fund Plans

Mutual funds generally offer direct and regular plans within the same scheme.

Both plans invest according to the scheme's investment objective and underlying portfolio strategy.

The primary distinction is the distribution arrangement and associated expenses.

Direct plans do not include distributor commissions in their expense structure. Regular plans include distribution-related expenses, which generally result in a higher expense ratio.

The expense ratio represents the annual operating expenses charged to a mutual fund scheme relative to its assets.

Because these expenses are reflected in net asset value calculations, direct and regular plans of the same scheme can report different NAVs and returns over time.

What Changes for Investors?

The November 1 implementation changes the default displayed on AMC digital platforms.

Previously, the way direct and regular options were presented could vary depending on the investment channel and platform design.

Under the announced approach, the direct option is presented first by default, while investors choosing a regular plan receive additional information about its higher costs.

The change does not merge the two plan structures or alter the underlying investment mandates of mutual fund schemes.

It also should not be interpreted as a prohibition on distributor-assisted investments.

Investors can continue to access regular plans where those plans are offered through permitted distribution arrangements.

Broader SEBI Regulatory Agenda

The direct-plan change was discussed alongside other initiatives concerning capital-market participation, regulatory simplification and investor protection.

SEBI has also been examining improvements to market disclosures, mutual fund transaction settlement and the use of technology in financial-market supervision.

The regulator's technology initiatives include expanding automated monitoring and analytical tools for regulated entities.

Within the mutual fund segment, the direct-plan default specifically addresses cost visibility at the point of investment.

Its longer-term effect on the proportion of industry assets held in direct and regular plans will depend on subsequent investment and distribution patterns.