SEBI Plans to Make Direct Mutual Fund Plans the Default from Nov 1

Most investors who open a fund page on an AMC website today have to pick between a direct plan and a regular plan, often without being sure what separates them. From 1 November 2026, SEBI is expected to make direct plans the default option on AMC digital platforms, following an announcement by SEBI Chairman Tuhin Kanta Pandey. The change is part of SEBI’s wider efforts to strengthen cost disclosure requirements for mutual funds over the years.

What SEBI Has Changed

The default applies to AMC digital platforms, including AMC websites. Investors can continue to opt for regular plans and will be made aware of their higher expense ratios under the new rules. Regular plans are not being discontinued, and investors can still invest through mutual fund distributors.

The announcement affects the default selection shown on screen, not the availability of products. The exact format of the default selection and cost disclosure should be confirmed against SEBI’s applicable regulatory communication.

Direct vs Regular Mutual Funds: Key differences

The main difference between direct vs regular mutual funds is how distributors are paid. Both plans invest in the same scheme and have the same portfolio and fund manager.

Feature	Direct plan	Regular plan
Portfolio and fund manager	Same as the regular plan	Same as the direct plan
Distributor commission	None	Included in the expense ratio
Expense ratio	Lower	Higher
NAV	Generally higher than the corresponding regular plan	Generally lower than the corresponding direct plan
Advice or servicing	Investor decides independently	Distributor can assist

Why the Mutual Fund Expense Ratio Matters

The mutual fund expense ratio is the annual fee, expressed as a percentage of assets, that a scheme deducts to cover management and running costs. Expense ratios vary by scheme. Direct plans generally have lower expense ratios because distributor commissions are excluded. Investors can compare the applicable costs using AMFI’s scheme-wise Total Expense Ratio (TER) disclosures.

A small annual gap compounds into a large difference. For illustration, a ₹10,000 monthly SIP over 20 years could grow to approximately ₹99.9 lakh at an assumed annual return of 12%, compared with ₹87.4 lakh at 11%. These are illustrative estimates, not guaranteed returns or a prediction of the difference between direct and regular plans. The effect of recurring costs can become more significant over long investment periods.

What Changes for Investors

The main difference will be in how investors see the available options on an AMC’s digital platform. Direct plans are expected to appear as the default choice for first-time investors. Those who manage their investments independently may find this simpler, while also saving on costs from the first instalment. Investors choosing regular plans will receive information about the higher expense ratios before making their decision.

SEBI’s own framework has been moving in the same direction. The SEBI (Mutual Funds) Regulations, 2026 replaced the 1996 regulations and established a revised framework for mutual fund operations and regulatory obligations. The direct-plan default announced in October 2026 is a separate development. Together, these SEBI rules encourage mutual funds to disclose costs more clearly.

What Does Not Change

The announced change concerns plan selection on AMC digital platforms. Investors can continue holding their existing regular plans without having to move to direct plans. Distributors can still sell regular plans, and the commission they earn still comes from the expense ratio.

Both plans share the same underlying portfolio and fund manager, but have different expense ratios and NAVs. Investors should check applicable exit loads and other scheme conditions before switching plans.

Which Mutual Fund Plan Should Investors Choose: Direct or Regular?

The direct vs regular mutual funds decision is personal, and the new default does not decide it for anyone. A direct plan suits an investor who is comfortable selecting a scheme, tracking it and sticking with a SIP through market falls without prompting.

A regular plan may suit investors who value ongoing guidance, financial planning support, help with paperwork or assistance in maintaining investment discipline. The additional cost should be weighed against the value of these services.

Investors who want to compare options before choosing can start with mutual fund investing options on Religare.

Conclusion

Direct mutual funds will remain available alongside regular plans, but making them the default changes how investors access the two options. The announced change is intended to give greater importance to cost considerations when investors select mutual fund plans. Anyone starting a SIP in November 2026 should compare the expense ratios of both plans and consider whether the services offered through a regular plan justify the additional cost before making a choice.

Frequently Asked Questions (FAQs)

When does SEBI’s Direct Plan default come into effect?

SEBI Chairman Tuhin Kanta Pandey said that from 1 November 2026, direct mutual fund plans will be the default choice on AMC digital platforms.

Will Regular Plans be discontinued?

No. Regular plans remain available and investors can still invest through distributors. Only the pre selected option on AMC platforms changes.

Is my Existing Regular Plan Investment affected?

No. Existing regular-plan investments will remain unchanged and will not automatically move to direct plans. Investors who wish to switch should first check the applicable tax, exit load and other transaction-related charges.

Why are Direct Mutual Funds cheaper?

They carry no distributor commission, so the expense ratio is lower while the portfolio stays the same as the regular plan.