Direct plan adoption in India

A direct plan is the separate plan of an Indian mutual fund scheme for investments not routed through a distributor, carrying its own net asset value (NAV), a lower expense ratio and no commission, which SEBI has required in every scheme since 1 January 2013 under circular CIR/IMD/DF/21/2012 of 13 September 2012. Direct plan adoption is the share of mutual fund assets held in those plans: Rs 33.28 lakh crore, or 45.1 per cent of industry assets under management (AUM), in March 2026, according to the AMFI-Crisil Factbook 2026.

The share has never crossed half of industry assets. The Factbook series reads 37.4 per cent in March 2019, 43.4 per cent in March 2021, 41.2 per cent in March 2024 and 45.1 per cent in March 2026, and the regular plan still held 54.9 per cent at the last reading. Figures of “over 50 per cent” or “57 to 60 per cent” circulating in 2025 and 2026 have no AMFI source.

Direct plans are an institutional product first. Banks and financial institutions held 87.8 per cent of their mutual fund assets in direct plans in March 2026, and corporates 72.2 per cent, while retail investors held 36.7 per cent, up from 21.4 per cent in March 2021. Systematic investment plans (SIPs) are the most regular-heavy part of the market: direct plans held 21 per cent of SIP assets in March 2025.

Three SEBI instruments define the channel today. Para 3.4 of the Master Circular for Mutual Funds of 20 March 2026 carries the direct-plan rule. Regulation 22A(2) of the SEBI (Investment Advisers) Regulations 2013 has required fee-paid advisers to use only direct plans since 30 September 2020. SEBI circular SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/86 of 13 June 2023 created the Execution-Only Platform (EOP) category for apps that deal in direct plans alone.

For the plan-by-plan comparison an investor faces at the point of purchase, see regular plan versus direct plan ; this article covers the rule, the adoption data and the channels.

What the direct plan rule requires

SEBI’s direct plan rule requires every mutual fund to offer, in each existing and new scheme, a separate plan for investments not routed through a distributor, with a lower expense ratio, no commission paid from it and a separate NAV. The current text is para 3.4 of the SEBI Master Circular for Mutual Funds dated 20 March 2026 (HO/24/13/11(1)2026-IMD-POD-1/I/7602/2026), which restates paragraph D of circular CIR/IMD/DF/21/2012 of 13 September 2012 without change of substance.

The 2012 wording of para D.2 was: “Such separate plan shall have a lower expense ratio excluding distribution expenses, commission, etc., and no commission shall be paid from such plans. The plan shall also have a separate NAV.” The 2026 Master Circular, para 3.4.2, puts it more briefly: the plan “shall have a lower expense ratio as no distribution commission is paid under such plan.”

Four consequences follow from that text:

• Same portfolio, two NAVs. A direct plan is a plan of the scheme, not a separate scheme. Both plans own the same securities in proportion; only the expense charged differs, so the direct plan NAV rises above the regular plan NAV over time.
• No eligibility test. The circular restricts nothing by investor type. Any investment made without a distributor code qualifies, whether placed by a retail investor on an AMC website, a corporate treasury, or a client of a registered investment adviser.
• The expense gap is the distribution cost. The total expense ratio cap under Regulation 66(7) of the SEBI (Mutual Funds) Regulations 2026 applies to both plans; the direct plan’s base expense ratio is lower by what the regular plan pays to distributors as trail commission . The TER disclosure format in the Master Circular (formats annexure, note 6) repeats that the direct plan’s base expense ratio excludes “distribution expenses, commission, etc.”
• No commission from the plan. A distributor holding an AMFI ARN earns nothing on direct-plan money, which is why distributor-led channels sell the regular plan .

Regulatory history from entry load to the 2026 Master Circular

After entry loads ended in 2009, a direct investor paid no load but the same expense ratio as everyone else, and the 2012 circular split the expense into two plans. SEBI circular SEBI/IMD/CIR No. 4/168230/09 of 30 June 2009 removed the entry load on all schemes; scheme documents filed with SEBI that year record the change as effective from 1 August 2009. An investor coming direct then paid no load, but still paid the same expense ratio as a distributor-sourced investor, because commission was carried inside the scheme’s expenses.

Source: SEBI circulars and Master Circular as listed; the 1 August 2009 date is from AMC scheme documents filed with SEBI. Compiled by webnotes.in, 22 October 2026.

The entry load history and the 1996 regulations under which the direct plan was introduced are covered separately. The SEBI (Mutual Funds) Regulations 2026, notified on 15 January 2026 and in force from 1 April 2026, did not remove or alter the direct plan; the Master Circular of 20 March 2026 carried it forward with the 2012 circular and a SEBI email of 28 April 2015 as its cited sources (footnote 37).

Direct plan share of industry AUM, 2019 to 2026

Direct plans held 45.1 per cent of Indian mutual fund AUM in March 2026, Rs 33.28 lakh crore, against 54.9 per cent in regular plans, according to the AMFI-Crisil Factbook 2026 (“Resilient Run”, p.16). AMFI’s monthly report carries no plan split (the September 2026 report has no plan column); the annual AMFI-Crisil Factbook, which reports March snapshots, is the source used here.

Source: AMFI and Crisil Intelligence, Factbook 2024 and Factbook 2026. The two editions are separate publications and neither explains the lower March 2024 reading against March 2021, so the rows are dated snapshots rather than one continuous series.

No AMFI publication gives an industry-level direct share for March 2016, March 2020 or March 2025, so no figure is stated here for those years. The 21 per cent figure for March 2016 that appeared on this page until October 2026, and in several neighbouring webnotes.in articles, has no traceable source and has been withdrawn.

Taking each edition on its own terms, the direct share was 37.4 per cent in March 2019 (Factbook 2024) and 45.1 per cent in March 2026 (Factbook 2026). On the Factbook 2026 figures, total industry AUM in March 2026 was about Rs 73.8 lakh crore (Rs 33.28 lakh crore divided by 0.451); the long-run series is in mutual fund AUM growth in India .

Who holds direct plans: investor category split

Direct plans are dominated by institutions, and retail investors are the fastest-moving group. The AMFI-Crisil Factbook 2026 (p.17) gives each investor category’s direct share for March 2021 and March 2026:

Source: AMFI-Crisil Factbook 2026, p.17.

The Factbook puts the institutional total plainly: banks and FIs, corporates and FIIs held Rs 19.05 lakh crore through direct plans in March 2026 and Rs 8.73 lakh crore through regular plans. A corporate treasury parking surplus cash in a liquid or overnight fund gains nothing from a distributor, and on a Rs 500 crore holding even a 0.05 percentage point expense gap is Rs 25 lakh a year.

Individuals are the mirror image. The Factbook 2026 (p.32) records that retail and HNI investments made up 78 per cent of regular-plan AUM. The earlier Factbook 2024 (p.14) showed the same split from the other side: in March 2024 corporates held 60.4 per cent of all direct-plan AUM, HNIs 21.1 per cent and retail investors 15.3 per cent, while regular-plan AUM was 41.6 per cent HNI, 36.8 per cent retail and 18.1 per cent corporate.

Individual categories gained direct share; institutional categories lost it. Retail investors added 15.3 percentage points of direct share in five years, NRIs 7.9 and HNIs 6.3, while every institutional category’s direct share fell, corporates by 5.8 points and FIIs by 9.7. The Factbook does not explain the institutional decline, and institutions remain direct by a wide margin.

Direct plans in SIPs

Direct plans held 21 per cent of SIP assets in March 2025, up from 12 per cent in March 2020, according to the AMFI Annual Report for FY2024-25 prepared with Crisil Intelligence, against a direct share of total industry AUM of 41.2 per cent in March 2024 and 45.1 per cent in March 2026. The SIP article covers the instrument itself.

The AMFI-Crisil Factbook 2026 (p.33) splits SIP assets by monthly ticket size:

Source: AMFI-Crisil Factbook 2026, p.33.

Every band below Rs 10,000 gained 9 to 16 percentage points of direct share in five years, while the largest tickets went the other way, from 29 to 22 per cent. The Factbook’s summary is that regular plans held 70 to 78 per cent of SIP AUM across ticket sizes in March 2026. No AMFI release splits SIP accounts or monthly SIP inflows by plan, so the direct share of SIP flows by value or by count is not known and no figure is stated here.

Direct plan adoption by state

In March 2024, 10 states had less than 20 per cent of their mutual fund AUM in direct plans, down from 21 states in March 2019 (AMFI-Crisil Factbook 2024, p.39). The same Factbook records that in the Northeast more than 80 per cent of investment was made through regular plans.

The Factbook does not give a cause. A direct plan needs an investor who can complete KYC and transact online or at an AMC branch; in a district where the nearest point of contact is a bank branch or an individual distributor, the regular plan is the default. SEBI’s additional incentive for distributors who bring in new individual investors from B30 cities and women investors, under circular HO/(83)2025-IMD-POD-1/I/152/2025 of 27 November 2025, is paid to distributors and so attaches to regular-plan business.

Cost difference between direct and regular plans

The cost of a regular plan over a direct plan is the distributor commission, charged daily as a higher expense ratio on the same portfolio. At Parag Parikh Flexi Cap Fund , the largest PPFAS scheme, the base expense ratio on 30 September 2026 was 0.53 per cent for the direct plan and 1.05 per cent for the regular plan (PPFAS factsheet, September 2026), a gap of 0.52 percentage point a year in base expense ratio, which excludes GST and other permitted charges.

From allotment on 24 May 2013 to 30 September 2026, the fund’s direct plan returned 17.76 per cent a year and its regular plan 16.94 per cent (PPFAS factsheet). On those compound rates, Rs 1 lakh invested at allotment grew to about Rs 8.87 lakh in the direct plan and about Rs 8.08 lakh in the regular plan over the 13.35 years, a difference of about Rs 79,000 on the one lakh (webnotes.in calculation from the factsheet returns).

A forward-looking illustration with stated assumptions gives the same order of magnitude. Rs 10 lakh held for 20 years at a hypothetical 12 per cent gross return, less the two Parag Parikh Flexi Cap expense ratios, compounds to about Rs 87.7 lakh at 11.47 per cent and about Rs 79.9 lakh at 10.95 per cent: a gap of roughly Rs 7.8 lakh. The 12 per cent is an assumption, not a forecast.

The gap varies by scheme: at Parag Parikh Liquid Fund it was 0.08 percentage point (0.09 against 0.17 per cent, 30 September 2026, PPFAS factsheet). Category-level ranges of typical direct and regular expense ratios carried no source and have been removed; direct versus regular TER differential and the scheme’s own factsheet give the actual pair for any fund.

Execution-Only Platforms for direct plans

An Execution-Only Platform (EOP) is a digital platform that facilitates subscription, redemption and switch transactions in direct plans of mutual fund schemes, without advice, under SEBI circular SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/86 dated 13 June 2023, in force from 1 September 2023. Annex 1.5 of the circular says the entity “shall not provide services related to regular plans”. The framework is a circular, not a set of regulations; there are no “SEBI EOP Regulations 2023”, and the circular number 2023/74 and the July 2023 date seen on some websites are wrong.

The route to the circular ran through a SEBI consultation paper of 22 July 2022, approval at the SEBI board meeting announced on 20 December 2022 (press release 37/2022), and an amendment to the SEBI (Stock Brokers) Regulations 1992 notified on 17 January 2023 to create the broker route. Platforms already operating had three months from 1 September 2023 to apply.

Source: SEBI circular SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/86, 13 June 2023, Annex paras 1, 2 and 5; carried into the Master Circular of 20 March 2026, Chapter 19.

A platform an investment adviser or a broker provides only to its own advisory or broking clients falls outside the framework (Annex 1.2). The industry utilities, MF Utilities India and MF Central , and the RTA platforms of CAMS and KFin Technologies , had to register in one of the two categories within three months (Annex 13.1), while the stock exchange platforms NSE NMF II and BSE StAR MF are exempt from registration but must comply (Annex 13.2).

The 20 March 2026 Master Circular carries the framework as paras 19.1 and 19.2 with one change: a Category 1 EOP may now serve “investors/Investment Advisers”, where the 2023 text said “investors/other intermediaries”. Direct-plan apps such as Groww , Kuvera , ET Money , INDmoney , Paytm Money and Zerodha Coin are compared in direct mutual fund portals compared and mutual fund aggregators in India .

Investment advisers and the direct plan

A SEBI-registered investment adviser (RIA) must implement client advice only through direct plans. Regulation 22A(2) of the SEBI (Investment Advisers) Regulations 2013 reads: “Investment adviser shall provide implementation services to its advisory clients only through direct schemes/products in the securities market.” The proviso to Regulation 22A(1) bars any “commission or referral fees, whether embedded or indirect or otherwise”, received at the adviser’s group or family level, and Regulations 22A(3) and 22A(4) bar an implementation fee and leave the client free not to use the adviser’s implementation service.

Regulation 22(1) adds that an individual adviser “shall not provide distribution services”, and Regulation 22(3) requires a non-individual adviser’s group to segregate advice and distribution at client level. Both regulations were inserted or substituted by the IA (Amendment) Regulations 2020 with effect from 30 September 2020 (SEBI consolidated text amended up to 25 November 2025, footnotes 83 and 84). SEBI’s IA FAQ of August 2025 (questions 32 and 34) lets an individual adviser keep trail commission earned on distribution done before registration.

The adviser channel is small in headcount: SEBI’s intermediary register listed 1,058 registered investment advisers on 22 October 2026. A fee-paying adviser’s client therefore holds direct plans by law, but the advised segment cannot by itself explain a 45.1 per cent direct share; the institutional holdings in the investor-category table do most of that work. How to compare a distributor and an RIA and RIAs in mutual funds set out the trade-off for an investor.

Distributors and the regular plan

A mutual fund distributor registered with AMFI earns trail commission from the AMC, paid out of the regular plan’s higher expense ratio, and nothing on direct-plan money. Banks, national distributors and individual mutual fund distributors are paid only on regular-plan assets, and the regular plan held 54.9 per cent of industry AUM in March 2026 and 70 to 78 per cent of SIP AUM (AMFI-Crisil Factbook 2026).

SEBI’s answer has been disclosure rather than prohibition. Para 15.7.4(e) of the 20 March 2026 Master Circular requires the half-yearly consolidated account statement to show “the amount of actual commission paid by AMCs/MFs to distributors (in absolute terms)” against the investor’s holding in each scheme, and the scheme’s average TER split into investment and advisory fees, distributor commission and other expenses, for the plan the investor actually holds. The CAS does not print the other plan’s expense ratio alongside. The provision traces to circular Cir/IMD/DF/16/2011 of 8 September 2011 and was amended by circulars of 18 March 2016, 20 September 2016, 1 July 2024 and 14 February 2025 (Master Circular footnote 366); distributor remuneration disclosure has the detail.

The commission funds a service the direct plan does not include: a named person who opens the folio, handles the paperwork and is on the telephone in a falling market. Whether that is worth 0.52 percentage point a year on a fund such as Parag Parikh Flexi Cap is the investor’s judgment; SEBI’s rules ensure only that the price is printed on the statement.

Switching from regular to direct plan

An investor in a regular plan can move to the direct plan of the same scheme by a switch, which redeems the regular-plan units and allots direct-plan units at the respective NAVs. Para 11.7.3 of the 20 March 2026 Master Circular says: “Exit load shall not be charged on bonus units, units allotted on reinvestment of dividend and switch from regular plan to direct plan or vice-a-versa under the same scheme.” AMCs disclose their procedure in the scheme information document , which is the document to check for the scheme concerned.

The switch is a transfer for income tax. The Income-tax Act 2025, in force from 1 April 2026, exempts by section 70(1)(zk) only the transfer of units in a “consolidating plan” in exchange for units of the consolidated plan of the same scheme, which is a merger of plans within a scheme carried out under the SEBI mutual fund regulations, not an investor’s choice. A voluntary regular-to-direct switch is outside that exemption, so any gain or loss on the regular-plan units arises in the year of the switch, at the rates and, for equity long-term gains, the annual exemption threshold set out in capital gains tax in India , and the direct-plan units start a new holding period. Units of an ELSS still inside the three-year lock-in cannot be switched.

The practical steps, including SIP re-registration and the effect on a distributor’s trail, are in how to switch from regular to direct , direct and regular switch implications and is a mutual fund switch a taxable event .

Limits of direct-plan investing

A direct plan removes the commission and with it any duty of a distributor to the investor. No one checks scheme selection against the riskometer , rebalances an allocation, or counsels the investor against redeeming in a market fall. The 2012 circular sets no eligibility test for the direct plan, and Regulation 22A(2) of the IA Regulations requires a fee-paid adviser to implement through direct plans, so advice on a direct plan is available only for a separate fee.

The saving also depends on the scheme. The direct plan of Parag Parikh Liquid Fund charged a base expense ratio of 0.09 per cent and its regular plan 0.17 per cent on 30 September 2026 (PPFAS factsheet), a gap of 0.08 percentage point, against 0.52 point in the same AMC’s flexi cap fund. A switch out of either plan is a transfer, so any capital gain on the regular-plan units is taxable in that year, since section 70(1)(zk) of the Income-tax Act 2025 does not cover it; on the PPFAS figures, the expense saving is larger in the equity scheme than in the liquid scheme.

Corrections to figures in circulation

The figures below have appeared on this page, on neighbouring webnotes.in articles or on other websites, and are contradicted by the primary sources named.

Source: as stated in each row. Compiled by webnotes.in, 22 October 2026.

See also

• Regular plan versus direct plan
• Direct versus regular TER differential
• Total Expense Ratio in Indian mutual funds
• Mutual fund trail commission
• Distributor remuneration disclosure
• Mutual fund distribution in India
• Mutual fund distributors
• ARN for mutual fund distributors
• AMFI ARN
• Discount brokers versus distributors
• SEBI Execution-Only Platform framework
• EOP framework 2023
• RIAs in mutual funds
• SEBI (Investment Advisers) Regulations 2013
• How to compare a distributor and an RIA
• Direct mutual fund portals compared
• Mutual fund aggregators in India
• How to switch from regular to direct
• Direct and regular switch implications
• Mutual fund switch as a taxable event
• Mutual fund switch
• Entry load in mutual funds, history
• Consolidated account statement
• SEBI (Mutual Funds) Regulations 2026
• SEBI (Mutual Funds) Regulations 1996
• SEBI Investor Charter for Mutual Funds
• Mutual funds in India
• Mutual fund industry in India
• Mutual fund AUM growth in India
• SIP in Indian mutual funds
• T30 and B30 cities
• AMFI
• Passive investing wave in India
• Index funds in India
• Parag Parikh Flexi Cap Fund
• Capital gains tax in India
• Groww
• Kuvera
• ET Money
• INDmoney
• Paytm Money
• Zerodha Coin
• MF Central
• MF Utilities India
• NSE NMF II
• BSE StAR MF

External references

• SEBI circular CIR/IMD/DF/21/2012, 13 September 2012 (PDF)
• SEBI circular on Execution Only Platforms, 13 June 2023
• SEBI Master Circular for Mutual Funds, 20 March 2026
• AMFI-Crisil Factbook 2026 (PDF)
• SEBI (Investment Advisers) Regulations 2013, consolidated (PDF)
• SEBI register of investment advisers

References

1. SEBI, Circular CIR/IMD/DF/21/2012, “Steps to re-energize Mutual Fund industry”, 13 September 2012, para D (Separate option for direct investments).
2. SEBI, Master Circular for Mutual Funds, HO/24/13/11(1)2026-IMD-POD-1/I/7602/2026, 20 March 2026: paras 3.4, 11.7.1, 11.7.3, 15.7.4(e), 19.1 and 19.2.
3. SEBI, Circular SEBI/HO/IMD/IMD-PoD-1/P/CIR/2023/86, “Regulatory framework for Execution Only Platforms for facilitating transactions in direct plans of schemes of Mutual Funds”, 13 June 2023.
4. SEBI, Circular SEBI/IMD/CIR No. 4/168230/09, 30 June 2009 (abolition of entry load), as cited at Master Circular footnote 306.
5. SEBI (Investment Advisers) Regulations 2013, Regulations 22 and 22A, consolidated text amended up to 25 November 2025.
6. AMFI and Crisil Intelligence, Factbook 2026 “Resilient Run”, pp.16, 17, 32 and 33.
7. AMFI and Crisil Intelligence, Factbook 2024, pp.14 and 39.
8. AMFI and Crisil Intelligence, Annual Report on the Indian mutual fund industry, FY2024-25 (SIP section).
9. SEBI, press release 37/2022, board meeting of 20 December 2022.
10. PPFAS Mutual Fund, Parag Parikh Flexi Cap Fund factsheet, September 2026.