Over 63% of retail mutual fund AUM is in regular plans: Why is SEBI pushing direct plans? Experts explain pros and cons
Direct and regular plans of a mutual fund scheme hold the same portfolio and are managed by the same fund manager. However, their returns differ because of the costs involved.
While both plans may be available on the same platforms, direct plans are routed directly through an asset management company (AMC), whereas regular plans are bought through intermediaries such as brokers.
Regular plans carry distribution-related costs, resulting in a higher expense ratio that can reduce investors’ returns over the long term.
Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey, speaking at NDTV Profit IGNITE on Wednesday, announced that direct plans will become the default option on AMC digital platforms from 1 November. Investors opting for regular plans will also have to be informed about the higher expense ratio.
However, the latest AMFI-Crisil Factbook 2026 data shows that regular plans continue to account for the larger share of retail mutual fund investments. As of March 2026, retail investors held mutual fund assets (AUM) worth ₹18.95 lakh crore, of which 36.7% is invested in direct plans, while the remaining 63.3% is still in regular plans.
Why is SEBI pushing direct plans despite the dominance of regular plans? How will the 1 November new rule work, and what are its advantages and limitations? Here’s what experts have to say.
How can investors buy mutual funds and what changes from 1 Nov?
Vedant Gupte, Co-Founder and CEO of investment platform Trackk, said, “From November 1, when investors open an AMC’s app to start a SIP, the cheaper direct plan will be pre-selected.”
Harsh Vardhan Dawar, ACA, CFA, FRM, Founder of Wealth Cafe, explained that investors can currently access mutual funds through several platforms:
- Industry platforms: Investors can invest via MF Central or CAMS and KFintech’s investor portals. There are no charges for investors, and they can choose to invest via direct or regular plans.
- Mutual fund websites: Investors can invest directly through individual fund house websites, although they need to open separate accounts with each AMC. Here too, investors can choose to invest via direct or the regular plans.
- Private platforms: Brokers such as Zerodha, Groww and ICICI Securities, wealth managers such as Nuvama and 360 ONE, and several fintech startups also offer direct and regular plans.
“The current SEBI ruling is expected to affect the mutual fund websites. It may extend to the industry platforms,” he added.
Why is SEBI pushing direct plans?
Dawar said mutual funds and insurance continue to be push-products and are sold rather than bought by investors. That explains the large share of regular plans in the total AUM. By making the direct plan the default, SEBI wants the investor to consciously choose the regular plan rather than being pushed into the regular plan as the default.
Gupte said the dominance of regular plans in retail AUM does not necessarily reflect investor preference. Rather, many investors enter the mutual fund market through distributors, who typically sell regular plans. This trend has continued since direct plans were introduced only in 2013.
Since the expense ratio difference compounds over 15–20 years, it can significantly affect long-term returns. Gupte said SEBI is changing the default because investors tend to stick with pre-selected options. Investors can still choose regular plans, but they will have greater visibility of the additional cost.
“If a distributor is adding real value through asset allocation, rebalancing, and keeping you invested through a crash, they should be able to explain that value to you. SEBI is asking for exactly that conversation,” he added.
What are the advantages and limitations of making direct plans the default?
Gupte said first-time investors starting small SIPs on an AMC App and those comfortable picking a fund stand to benefit. Investors who rely on distributors can continue with regular plans, but will have greater visibility of their costs.
“The new rule covers AMCs’ own digital platforms, and existing investments won’t switch automatically,” he added.
Dawar expects the change to benefit retail investors and gradually increase the share of direct-plan AUM, but does not expect a material impact on overall mutual fund inflows.
Disclaimer: This story is for educational purposes only. The views and recommendations made above are those of individual analysts or broking companies, and not of Mint. We advise investors to check with certified experts before making any investment decisions.
About the Author
Sheetal Goel is a Content Producer at Livemint, where she covers corporate developments, personal finance, business trends, markets, and SEBI-related updates. She focuses on simplifying complex financial concepts and presenting them in a clear, reader-friendly manner, thereby helping audiences better understand investment trends, personal finance, and market developments. Her writing focuses on making finance more accessible to everyday readers while maintaining clarity, accuracy, and relevance.
She holds a degree in Economics (Hons.) along with an MBA in Finance, which has helped her develop a strong foundation in financial analysis, market understanding, and business reporting. Before joining journalism, she worked with finance and broking firms, where she closely followed market developments, investment strategies, and evolving industry trends. This practical exposure strengthened her understanding of financial markets. She has also written content across multiple formats and platforms, including YouTube, LinkedIn, and Instagram.
Over time, she has developed expertise in covering market-linked stories, investor-focused topics, and regulatory updates in a simplified yet informative style. She also enjoys reading and listening to Hindi poetry, reflecting her appreciation for literature and creative expression beyond the world of markets and numbers.
