Market regulator Securities and Exchange Board of India (SEBI) has extended the deadline for implementing its additional incentive structure for mutual fund distributors aimed at on-boarding new investors from beyond the top-30 cities and women investors across the country. The revised framework will now come into effect from 1st March instead of the earlier 1 February 2026 timeline.
In a circular issued on 7 January 2026, SEBI says the extension was granted after receiving feedback from industry participants, who flagged operational challenges in putting in place the systems and processes required for smooth implementation of the new incentive mechanism.
The incentive framework, first announced in November 2025, is designed to encourage distributors to expand mutual fund penetration among first-time investors from B-30 cities as well as women investors from both top-30 and B-30 locations. Under industry classification, B-30 refers to locations outside the 30 largest cities by mutual fund assets.
SEBI says all other provisions of the 27 November 2025 circular would remain unchanged and the extension only applies to the implementation timeline.
The revised incentive structure was introduced after SEBI withdrew the earlier B-30 incentive provision under Regulation 52(6A)(b) of the SEBI (Mutual Funds) Regulations, 1996, through a gazette notification issued on 31 October 2025. The regulator had earlier removed that provision amid concerns over misuse and industry feedback.
To continue promoting financial inclusion while addressing governance concerns, SEBI enabled asset management companies to pay additional commissions to distributors under Regulation 52(4A). The incentives are targeted at two categories of new investors—individual investors with a new PAN from B-30 cities, and new women investors with a new PAN from any location.
Under the framework, distributors will be eligible for an additional commission of 1% on lump-sum investments, subject to a cap of Rs2,000, provided the investment is retained for at least one year. For systematic investment plans, distributors will receive 1% of the total SIP amount invested during the first year, again capped at Rs2,000.
SEBI has clarified that these incentives will be paid over and above the existing trail commission. However, distributors will not be allowed to claim dual incentives for the same investor or investment. They can choose either the B-30 incentive or the women investor incentive, but not both.
The incentive payments will be funded from the 2bps (basis points) that asset management companies (AMCs) set aside annually for investor education and financial inclusion initiatives and will be subject to clawback provisions.
Certain categories of schemes have been excluded from the incentive framework, including exchange-traded funds, domestic fund of funds with more than 80% of assets invested in local funds, and short-term schemes such as overnight, liquid, ultra-short duration and low-duration funds.
The regulator also clarified that changes to scheme offer documents arising from the revised incentive structure will not be treated as a fundamental attribute change.
The extension is expected to give AMCs and distributors additional time to align systems and ensure compliance before the incentives come into force, as SEBI continues to push for wider participation in mutual fund investments.
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