Direct vs Regular Plan

Every mutual fund scheme in India comes in two flavours: Direct and Regular. They hold the exact same portfolio, run by the same fund manager, with the same strategy. The only difference is who you buy through and what you pay in fees.

How it works

SEBI introduced direct plans in January 2013. A direct plan is purchased straight from the AMC (its website, the AMC app, or platforms like MF Central and the RTA portals of CAMS/KFintech). No distributor sits in between, so the fund house does not pay any commission, and that saving is passed on to you as a lower expense ratio.

A regular plan is bought through a distributor, bank, or advisor (an ARN holder). Their trail commission is baked into the scheme's expense ratio, so a regular plan always charges a higher Total Expense Ratio (TER) than its direct twin.

Why it matters

The gap is typically a few tenths of a percent for debt funds and larger for equity funds. That sounds tiny, but it compounds. Because the portfolio is identical, the direct plan's NAV will always grow slightly faster than the regular plan's, and over 10-20 years of SIPs that difference can add up to a meaningful sum.

You can spot the difference instantly: scheme names carry a tag like "...Direct Growth" versus "...Regular Growth".

The trade-off

Direct plans reward DIY investors who can pick suitable schemes themselves. If you genuinely need hand-holding, a good distributor or a fee-only SEBI Registered Investment Adviser (RIA) can be worth it.

A common mistake is paying for a regular plan while getting no real advice, just an account opened years ago. Another is conflating the two with active versus passive, or assuming returns differ for any reason other than cost.

If you already hold regular plans, you can switch to direct, but remember that a switch is treated as a redemption and fresh purchase, so capital gains tax and any exit load may apply. Many investors switch gradually to manage the tax impact.