SEBI Extends Timeline for Distributor Incentive Framework to March 1, 2026

The Securities and Exchange Board of India (SEBI) has deferred the implementation of its additional incentive structure for mutual fund distributors aimed at expanding participation from smaller cities and women investors.

Revised Implementation Date

In a circular, SEBI said the framework, which was earlier scheduled to come into force on February 1, 2026, will now be implemented from March 1, 2026. The incentive structure was first announced through a circular dated November 27, 2025.

The initiative is designed to deepen mutual fund penetration by rewarding distributors for mobilising investments from two priority segments—new individual investors (new PAN) from B-30 cities, and new women individual investors (new PAN) from both T-30 and B-30 cities.

Industry Feedback Drives Deferment

According to SEBI, the rollout has been postponed after industry participants highlighted operational challenges in establishing the necessary systems and processes within the original timeline. The regulator clarified that all other provisions of the November 27, 2025, circular will remain unchanged.

The extension is expected to give mutual funds, asset management companies (AMCs), trustee entities, and registrars and transfer agents (RTAs) additional time to align their operational frameworks with the new incentive mechanism.

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Key Features of the Incentive Structure

Under the proposed framework, asset management companies will fund the additional incentive, capped at 1% of the lump-sum investment or total SIP contributions in the first year, subject to a maximum of ₹2,000 per eligible new investor. The incentive will be drawn from the existing 2 basis points earmarked annually for investor education and financial inclusion and will be paid over and above regular trail commissions.

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