SEBI Introduces Additional Incentives for Mutual Fund Distributors to Boost B-30 and Women Investors

The Securities and Exchange Board of India (SEBI) has recently unveiled a revised and targeted incentive structure for mutual fund distributors, marking a significant step toward deepening financial inclusion and increasing investor awareness nationwide. Effective February 1, 2026, this new framework under Regulation 52(4A) aims to systematically bring in first-time individual investors, particularly focusing on the underserved markets of Beyond Top-30 (B-30) cities and new women investors nationwide.

This move comes on the heels of the regulator's decision to revise the previous B-30 incentive framework on October 31, 2025, due to industry feedback citing concerns over its misuse. The new structure is designed to be more robust, transparent, and directly linked to genuinely new investor onboarding and sustained participation.

Focusing on New Investors

The core of SEBI's new circular, dated November 27, 2025, lies in its clear focus on specific, high-potential investor segments. The Distributors become eligible for an additional commission for onboarding two distinct categories of new individual investors, identified by a fresh Permanent Account Number (PAN) at the mutual fund industry level:

• New B-30 Individual Investors: This covers all new individual investors who hail from cities classified as Beyond Top-30 (B-30). This segment is crucial for geographic expansion, as B-30 cities represent significant untapped wealth and a willingness for systematic investment, yet they hold a relatively small share of the industry's total assets.

• New Women Individual Investors: This incentive is for new women investors (new PAN) from both Top-30 and B-30 cities. This move is intended to boost women investors' inclusion in the financial markets ecosystem, regardless of their location.

The Incentive Structure

The revised commission structure is designed to reward distributors for bringing in quality, long-term investors, rather than short-term transactions. The Asset Management Companies (AMCs) shall pay the additional commission to distributors under the following conditions:

This additional commission is a significant addition, as it will be paid over and above the existing trail commission a distributor receives from the scheme. The one-year investment retention clause for lump-sum investors is a critical guardrail, aiming to align the distributor's incentive with the investor's long-term financial well-being and thus reduce the risk of churn or mis-selling.

Source of Funds and The 'No Dual Incentive' Rule

Funding and Clawback Provisions

The funds for this additional distribution commission will not come from an increase in investor fees. Instead, AMCs will pay this commission from the 2 basis points or 0.02% of their daily net assets, which they are already mandated to set aside annually for investor education, awareness, and financial inclusion initiatives.

SEBI has also mandated adequate clawback provisions. This ensures that if the investor does not meet the necessary investment duration requirement, the commission can be recovered.

Preventing Incentive Stacking

To maintain the spirit of encouraging new investor growth without permitting exploitation, the circular strictly enforces a "No Dual Incentive" rule.

• Dual incentives for the same investor or investment shall not be permitted.

• For a new woman investor from a B-30 city, the distributor can claim either the B-30 incentive or the new woman investor incentive, but not both for the same investment. 

The distributor is, however, eligible to receive the additional commission for mobilizing investments from new women investors from the Top-30 cities in cases where the B-30 commission has not been claimed for the same woman investor or investment.

Schemes Not Eligible for the Payout

While the additional commission is mandatory for all schemes of a mutual fund, SEBI has specified exclusions to prevent the incentive from being applied to these products. The following schemes are not eligible for the additional distribution commission:

• Exchange Traded Funds (ETFs).

• Fund of Funds (domestic) where more than 80% of the Assets Under Management (AUM) is invested in domestic funds.

• Schemes having a duration requirement of less than one year, which include:

  • Overnight Fund.

  • Liquid Fund.

  • Ultra Short Duration Fund.

  • Low Duration Fund.

Implementation and Regulatory Framework

This regulatory overhaul is mandated under Regulation 52(4A) read with 77 of the SEBI (Mutual Funds) Regulations, 1996, to promote the orderly development of the mutual fund industry and act in the interest of investors.

To ensure a smooth transition and uniform application, the Association of Mutual Funds in India (AMFI) will issue the necessary implementation standards within 30 calendar days from the date of the circular, in consultation with SEBI.

The regulator has also simplified the compliance pathway for mutual fund houses, clarifying that any necessary changes to the offer documents resulting from this revised incentive structure will not be considered a Fundamental Attribute Change.