The Securities and Exchange Board of India has announced a revised incentive structure for mutual fund distributors, setting out new measures aimed at increasing market participation among first-time investors, particularly those living in smaller cities and women across the country. The changes were detailed in a circular issued on 27 November 2025.

According to the circular, the earlier incentive rule linked to investments from locations outside the top 30 cities had been discontinued after concerns were raised about potential misuse. Sebi said industry feedback had guided the development of the updated framework.

Under the new system, distributors will be eligible for additional commissions when they bring in new individual investors with fresh PANs from B-30 cities. Incentives will also be made available for onboarding new women investors from both the top 30 cities and B-30 cities. The circular stated that these revised rules will come into effect on 1 February 2026.

Sebi outlined that distributors will receive 1% of the first lump-sum investment made by an eligible investor, subject to a maximum cap of ₹2,000, provided the investment is maintained for at least a year. For SIPs, the distributor will be paid 1% of the total amount invested in the first year, again capped at ₹2,000. The regulator clarified that these payments will come from the 2 basis points AMCs already set aside annually for investor education and awareness.

The circular emphasised that this additional commission will be paid over and above the existing trail commission. However, Sebi made clear that dual benefits will not be permitted, noting: “a distributor cannot claim both the B-30 incentive and the women investor incentive for the same investment.”

Certain scheme categories will not be eligible for these additional commissions. These include ETFs, domestic fund-of-funds investing more than 80% in local funds, and schemes with a duration of less than a year, such as overnight, liquid, ultra-short duration and low duration funds.

Sebi also confirmed that the Association of Mutual Funds in India will work alongside the regulator to issue detailed implementation standards within 30 days. The circular added that updates to offer documents arising from this incentive revision will not be treated as a fundamental attribute change.