SEBI has introduced a new incentive framework for mutual fund distributors, replacing the earlier “B-30 incentive rule”, with a clear focus on promoting genuine first-time investors and enhancing financial inclusion across India. Notified on 31 October 2025, the framework targets individuals entering the mutual fund ecosystem for the first time, identified through new PAN numbers, ensuring that incentives are granted only for real new participants rather than existing investors. Under the new system, distributors will receive additional commissions for bringing in two specific categories of investors: individual investors from B-30 cities - that is, areas beyond the top 30 cities and women investors from any location in India. This represents a shift from the old framework, which primarily focused on geography, to a more investor-centric approach that recognizes the importance of fostering diverse participation. The incentives are structured to cover both lump-sum and SIP investments, with distributors eligible to earn 1% of the first transaction amount for lump-sum investments, capped at ₹2,000, provided the investor stays invested for at least one year. Similarly, for SIPs, distributors can earn 1% of the total first-year contributions, also capped at ₹2,000, ensuring that the rewards are meaningful but controlled. These incentives are paid on top of existing trail commissions, encouraging distributors to actively reach out to untapped investor segments without affecting their regular earnings.
A key feature of the new framework is that it does not impose additional costs on investors. AMCs will fund these commissions using the 2 basis points already reserved for investor education and inclusion, meaning the incentives are provided without burdening investors. SEBI has also deliberately excluded certain schemes to prevent misuse and promote long-term investing. ETFs, domestic fund-of-funds (with over 80% allocation in other domestic funds), and short-duration schemes like overnight or liquid funds will not qualify for these incentives. This ensures that distributors focus on encouraging investments in schemes that support stable wealth creation, rather than short-term or speculative flows. To avoid multiple claims for the same investor, the new rules include a strict provision that a distributor cannot claim more than one incentive per investor, preventing overlap, such as claiming both B-30 and women investor incentives for the same individual. The framework will be effective from 1 February 2026, giving distributors time to align their outreach strategies with these new rules. The underlying intention is to discourage manipulative practices, such as moving existing investors between schemes to claim incentives, and instead drive genuine growth in the mutual fund investor base.
Overall, SEBI’s revised incentive system is designed to strengthen retail participation, increase investment penetration in smaller towns, and promote broader involvement of women investors, contributing to a more inclusive and balanced mutual fund ecosystem. By linking incentives to first-time PAN-based investors and enforcing a one-year minimum holding period, the framework encourages distributors to focus on long term and meaningful engagement rather than short-term gains. The exclusion of short-duration schemes and the emphasis on new investor categories also signal a deliberate push towards financial literacy, stability, and sustainable growth in the mutual fund industry. After criticism of the earlier B-30 model for misuse and inconsistent implementation, SEBI’s new framework establishes a transparent, fair, and well-regulated structure that benefits both investors and distributors while supporting the broader goal of deepening mutual fund penetration in India. By fostering genuine investor growth, the framework is expected to drive stronger retail participation, encourage equitable opportunities for women and smaller towns, and ultimately contribute to a more resilient, diversified, and inclusive financial ecosystem.