Mutual fund distribution in India

Mutual fund distribution in India encompasses the regulatory framework, intermediary categories, technology platforms, and transaction infrastructure through which investors purchase, redeem, and switch units of mutual fund schemes offered by asset management companies (AMCs) registered with the Securities and Exchange Board of India (SEBI). The distribution ecosystem is governed by SEBI’s Mutual Fund Regulations 1996, AMFI (Association of Mutual Funds in India) guidelines, and the SEBI Investment Adviser Regulations 2013, with further architecture defined by SEBI’s Execution-Only Platform (EOP) framework of 2023. As of 2025, the industry distributed assets under management (AUM) of approximately Rs. 65 trillion across more than 15 crore unique investor folios.

Distribution in India bifurcates structurally into the regular plan channel, in which a distributor receives a trail commission from the AMC, and the direct plan channel, in which investors transact without a distributor and access lower expense ratios. Both channels share the same underlying transaction infrastructure: orders are routed to AMC registrars CAMS and KFin Technologies via platforms, exchanges, or direct AMC portals, and units are held either in statement-of-account (SOA) format or in demat accounts held with CDSL or NSDL.

Regulatory framework

SEBI Mutual Fund Regulations 1996

SEBI’s Mutual Fund Regulations 1996 (and the many amendment circulars issued thereafter) form the primary legal basis for the distribution ecosystem. The regulations define who may act as a distributor, prohibit upfront commissions (banned by SEBI circular in 2018), require trail-only commission structures, and mandate scheme information documents (SIDs) and key information memorandums (KIMs) for investor disclosure.

SEBI’s 2012 circular (SEBI/IMD/CIR No. 18/198647/2010, extended through subsequent amendments) introduced the direct plan mandate requiring all AMCs to offer a direct plan of every scheme from January 2013. The direct plan carries a lower expense ratio because no distributor trail commission is embedded. The expense ratio differential between regular and direct plans typically ranges from 0.5% to 1.5% per annum for equity funds and 0.1% to 0.5% for debt funds, with the exact difference equal to the trail commission paid to distributors in the regular plan.

AMFI registration and the ARN system

Every entity wishing to distribute mutual funds must obtain an AMFI Registration Number (ARN). AMFI, the industry body, operates the ARN registry and conducts the NISM Series V-A Mutual Fund Distributors Certification Examination, which all individual distributors must pass before obtaining an ARN. ARN holders must complete continuing professional education (CPE) requirements and renew their ARN periodically.

ARN holders include individual financial advisers, distribution companies (national distributors, regional distributors, sub-brokers), stockbrokers who have obtained an AMFI registration, banks distributing through their branch networks, and technology platforms such as Groww, Kuvera, ET Money, and Zerodha Coin. A direct-plan platform that routes investments without charging a distributor commission still requires an ARN to place orders with CAMS and KFintech on behalf of investors.

SEBI Investment Adviser Regulations 2013

SEBI’s Investment Adviser (IA) Regulations 2013 created a distinct category of registered investment adviser (RIA), who may charge a fee to clients for financial planning and investment advice but is prohibited from receiving commissions from product manufacturers. The 2013 regulations and their 2020 amendments define eligibility criteria (net worth, qualifications, organisational structure), client agreement requirements, and the advice-versus-execution separation.

An RIA may advise on mutual funds but, under the RIA model, must direct clients to execute transactions independently through an execution-only platform or AMC portal rather than through the RIA’s own interface. This separation distinguishes RIAs from mutual fund distributors, who may both advise informally and execute on behalf of clients.

EOP framework 2023

SEBI’s Execution-Only Platform (EOP) circular (SEBI/HO/IMD/IMD-POD-1/P/CIR/2023/74, May 2023) created a formal regulatory category for platforms that facilitate execution of mutual fund transactions without providing investment advice. EOPs must register with AMFI, maintain cybersecurity standards, display only direct plans unless the investor has a separate commission arrangement, and satisfy conditions around investor grievance redressal. The EOP framework addressed the grey area where fintech platforms were facilitating large volumes of direct-plan investments under the ARN framework but were subject to limited specific regulation as platforms. Kuvera, ET Money, MF Central, and MFU are examples of platforms operating within the EOP framework or using the ARN framework as the basis for direct-plan distribution.

Upfront commission ban (2018)

SEBI’s October 2018 circular (SEBI/HO/IMD/DF2/CIR/P/2018/137) prohibited AMCs from paying upfront commissions to distributors for new purchases and switches, including systematic investment plan (SIP) registrations. All compensation after October 2018 is trail-only: a periodic percentage of the AUM held in regular-plan folios. This structural change reduced the incentive for churning client portfolios and aligned distributor compensation with long-term client AUM retention.

Intermediary categories

Individual MF distributors

Individual ARN holders, often called mutual fund distributors (MFDs), are the most numerous intermediary category. They operate as independent financial advisers, serving clients directly through relationship-based models. Many MFDs operate via sub-broker arrangements with national distributors or via MFU for transactional processing. As of 2025, AMFI data showed over one lakh active individual ARN holders.

National and large distributors

Large distributors include banks (HDFC Bank, ICICI Bank, Axis Bank, SBI, Kotak Mahindra Bank) distributing through branch networks, and national distribution companies (NJ Wealth, Prudent Corporate Advisory, Systematix, Anand Rathi Wealth, IIFL Finance). NJ Wealth and Prudent Corporate Advisory are among the largest, each managing regular-plan AUM in excess of Rs. 1 trillion through networks of sub-distributor advisers.

Stockbrokers with AMFI registration

Stockbrokers registered with SEBI who also hold ARNs may distribute mutual funds through their trading platforms. Zerodha (operating Zerodha Coin for direct plans), Groww, Angel One, Upstox, and 5paisa all hold stockbroking licences and AMFI registrations, though most tech-first brokers have positioned themselves primarily in the direct-plan channel.

Banks and NBFCs

Bank branches distribute regular-plan mutual funds on behalf of multiple AMCs and earn trail commissions. Regulation requires banks distributing mutual funds to disclose the commission received to investors and to maintain a suitability framework. Large private banks have in-house wealth management arms that cross-sell AMC products to high-net-worth clients.

Transaction infrastructure

CAMS and KFin Technologies

The two AMC registrars and transfer agents are CAMS (Computer Age Management Services) and KFin Technologies. Together they process the majority of mutual fund transactions in India. CAMS handles registrar services for approximately 17 AMCs including HDFC AMC, SBI AMC, ICICI Prudential AMC, Axis AMC, and DSP AMC. KFin Technologies handles approximately 25 AMCs including Nippon India, Kotak, Aditya Birla Sun Life (ABSL), and UTI.

Both registrars maintain folio databases, process purchases, redemptions, switches, SIP registrations, and dividend payouts, and generate account statements. Investors may access their folios across all AMCs serviced by a registrar through the registrar’s own portal: CAMS Online and KFinKart.

MFU (Mutual Fund Utility)

MFU (Mutual Fund Utility) is an industry utility operated by MF Utilities India Private Limited, promoted by AMFI and a consortium of AMCs. MFU operates as a centralised transaction platform, allowing an investor to transact across multiple AMCs in a single interface using a Common Account Number (CAN). The CAN consolidates the investor’s folios across all participating AMCs and eliminates the need for separate registrations with each AMC.

BSE StAR MF and NSE NMF II

The two national stock exchanges operate mutual fund transaction platforms. BSE StAR MF (now BSE MF) is operated by BSE Limited and is one of the largest mutual fund transaction processing platforms by volume, used extensively by distributors and direct-plan investors. NSE NMF II is NSE’s equivalent platform. Both platforms route transactions to CAMS and KFin Technologies for processing and provide order management for distributors who are exchange members or have been granted platform access.

Demat vs. SOA holding

Mutual fund units may be held in two formats. In the SOA (statement-of-account) format, units are held in a folio maintained by the AMC’s registrar (CAMS or KFin Technologies), and the investor receives a statement rather than a demat holding. In the demat format, units are credited to the investor’s demat account with CDSL or NSDL and appear alongside equity shareholdings. Demat-format holding requires a demat account and is offered by demat-based platforms such as Zerodha Coin and Groww.

The SOA format is prevalent for investors using AMC portals, MFU, CAMS Online, KFinKart, and advisory platforms. Both formats are legally equivalent from an ownership standpoint; the primary practical difference is consolidation with equity holdings in the demat format and the ease of nomination and transmission in the SOA format via registrar-managed folios.

Direct plan ecosystem

The direct plan channel was created by SEBI’s January 2013 mandate. Direct plans carry lower expense ratios than regular plans and are accessible through AMC portals, aggregator platforms, exchange platforms, and registrar portals. The principal direct-plan platforms as of 2026 are:

• Kuvera – SEBI-registered investment adviser and EOP; free-to-use; goals-based planning tools
• ET Money – operated by Times Internet; fee-based premium tier; direct and regular plans
• INDmoney – portfolio aggregation + direct MF investing; US stocks and NPS also available
• Zerodha Coin – direct plans in demat form; integrates with Zerodha demat account
• Groww – both direct and regular plans; largest by transaction count among fintech platforms
• MF Central – CAMS and KFin joint portal; SOA-format; MF transaction and portfolio view
• CAMS Online – CAMS registrar portal for CAMS-serviced AMCs
• KFinKart – KFin Technologies portal for KFin-serviced AMCs
• AMC direct portals – each AMC operates its own direct portal (e.g., SBI MF Online, HDFC MF Online)

Regular plan ecosystem

Regular plans are distributed through banks, national distributors, sub-broker networks, and stockbrokers. The regular plan channel generates trail commission revenue for distributors, which is the primary economic basis for advice-with-execution models. Online regular-plan distribution is offered by Groww (via its ARN for regular plans), Paytm Money, Angel One, ET Money (Smart Deposit and managed portfolios), FundsIndia, Scripbox, and INDwealth among others.

MITRA and forgotten folios

MITRA (Mutual Fund Investment Tracing and Retrieval Assistant) is an AMFI initiative that allows investors or their legal heirs to trace and retrieve unclaimed or forgotten mutual fund folios. MITRA queries the CAMS and KFin Technologies databases and returns folio information linked to the investor’s PAN or name. The platform is accessible at mitra.amfiindia.com.

Market structure and AUM distribution

As of March 2025, total mutual fund industry AUM in India exceeded Rs. 65 trillion. Equity-oriented schemes accounted for approximately 55% of AUM, debt schemes for about 25%, and hybrid and passive schemes for the remainder. The regular plan channel accounted for a substantial majority of total AUM, reflecting the legacy of distributor-led sales, though the direct plan share has grown consistently since 2013.

The top five AMCs by AUM – SBI AMC, HDFC AMC, ICICI Prudential AMC, Nippon India AMC, and Kotak Mahindra AMC – collectively accounted for approximately 55% of industry AUM. The B-30 initiative (driving penetration beyond the 30 largest cities) has been a policy priority for SEBI and AMFI, with higher trail commissions permitted for B-30 inflows as an incentive for distributors to develop non-metro markets.

Investor protection framework

SEBI’s investor protection rules for mutual fund distribution require:

• Mandatory suitability assessment by distributors before recommending schemes
• Risk-o-meter labelling on all scheme documents
• Mandatory disclosure of commissions and expense ratios
• A 30-day free exit window on regular plans for investors who wish to switch to direct plans after receiving advice
• Access to SEBI’s SCORES (SEBI Complaints Redress System) for investor grievances
• Investor identification via PAN, with KYC completed through KYC Registration Agencies (KRAs) linked to CDSL, NSDL, CERSAI, or the Central KYC Records Registry (CKYCR)

References

• SEBI Mutual Fund Regulations 1996 and amendment circulars (sebi.gov.in/legal/acts.html)
• SEBI circular SEBI/HO/IMD/IMD-POD-1/P/CIR/2023/74 (EOP framework, May 2023)
• SEBI circular SEBI/HO/IMD/DF2/CIR/P/2018/137 (upfront commission ban, October 2018)
• AMFI guidelines on mutual fund distribution (amfiindia.com/guidelines)
• SEBI Investment Adviser Regulations 2013 and 2020 amendment
• AMFI monthly data: mutual fund industry AUM (amfiindia.com/research-information/amfi-monthly)