Direct mutual fund plans default on AMC sites from 1 Nov

What changed on 1 November

From 1 November, the starting point changes for anyone investing through a fund house's own website or app. SEBI has directed all mutual fund houses to make the direct plan the default option for investments made through their websites, SEBI chairman Tuhin Kanta Pandey said at an event. The direction was announced at the NDTV Profit IGNITE summit in Mumbai on 28 October 2026, where Pandey set out a wider set of market reforms.

This is a change to the default, not a ban on anything else. Direct and regular plans are two options of the same scheme and invest in the same underlying portfolio. The difference is cost and route. A direct plan is bought directly from the fund house, without distributor commission, so its expense ratio is lower. A regular plan is bought through a distributor or intermediary and carries distribution costs, so its expense ratio is higher.

The scope, stated plainly

The scope matters, and it is narrower than a blanket rule for every way of buying a fund. The direction covers investments through AMC websites and apps, the fund houses' own digital platforms. That is the scope stated in the announcements.

Two things are NOT stated in the material checked for this post, and readers should not assume them. First, no statement was found that third-party investment platforms must also switch their default to direct plans. Second, no statement was found that existing regular-plan holdings will be switched automatically to direct plans. If you already hold a regular plan, this announcement on its own does not say your holding changes. Watch for the fund houses' own notices and any further SEBI circular before assuming a switch.

Why the cost gap matters over time

The cost gap can look small in a single year and large over a long holding period. Distributor trail commissions on equity schemes are 0.50 to 1.17 per cent, on ELSS tax-saving funds 0.70 to 1 per cent, on hybrid and balanced advantage funds 0.50 to 0.80 per cent, and on debt funds 0.20 to 0.50 per cent, according to figures cited in the reporting.

Take a simple worked example to see the arithmetic, not as a prediction. On a ₹10 lakh investment held for a year, a 1 per cent annual cost difference is ₹10,000 for that year. Over ten years, the same yearly gap, before allowing for market returns, adds up to ₹1,00,000 in extra cost on that sum. Actual outcomes depend on returns and the exact expense ratios, so this is a cost to compare, not a guaranteed saving.

That is why the second part of the change matters as much as the default. Investors opting for regular plans must be informed about their higher expense ratios, so the extra cost of investing through a distributor is visible at the point of choice. SEBI has also made it mandatory for consolidated account statements to disclose the commission paid to distributors on all SIP transactions through regular plans.

Who is affected, and what to do

The change lands differently on three groups of investors.

DIY investors who already buy directly through AMC websites are the least affected. Feroze Azeez, joint CEO of Anand Rathi Wealth, said this group typically opts for direct plans already, so making direct the default is unlikely to change their behaviour materially. For them, the practical step is small: check that the plan shown at checkout is the one intended, and read the expense ratio before confirming.

Investors who value distributor help are also largely unaffected in practice, on Azeez's assessment. People who rely on distributors for financial planning, fund selection, portfolio construction and ongoing guidance are likely to keep investing in regular plans through them, because they value the service and support. For them, the useful step is to use the new disclosure: ask what commission is being paid on the SIP, compare the regular plan's expense ratio with the direct plan's, and decide whether the advice is worth that yearly gap.

New investors on an AMC site face the clearest change. The first option presented should now be the direct plan. Before switching away from it to a regular plan, pause at the cost warning, note the expense ratio difference, and check whether advice is being bought or only a transaction. A regular plan is not wrong in itself; it is a paid route, and the point of the reform is that the payment should no longer be easy to miss.

Plan	Bought through	Expense ratio	Commission
Direct	AMC website or app, directly	Lower	No distributor commission
Regular	Distributor or intermediary	Higher	Trail commission included

What else SEBI announced alongside

The direct-plan direction sits inside a wider reform package announced by Pandey on 28 October. SEBI is examining net settlement for mutual fund transactions, and plans to align listing timelines for REITs and InvITs with standard equity listings. It will also revisit mainboard and SME IPO frameworks, consult on Fixed Income Channel Partners for corporate bonds, review the debenture trustee framework, and pilot AI tools to flag early signs of corporate debt default from disclosures. Several of those items remain proposals or reviews rather than rules in force.

What to watch next

Watch the fund houses' own websites and apps from 1 November: whether the direct plan is genuinely the pre-selected option, and how clearly the higher expense ratio is shown when a regular plan is chosen. Watch the next consolidated account statement for SIPs through regular plans, where distributor commission should now be disclosed. And watch for any further SEBI circular that would extend the default beyond AMC platforms or touch existing holdings, because neither step is stated in the announcements checked here.

This story is informational only and is not financial advice.

📷 Illustration: AI-generated