SEBI's 1 November Mutual Fund Rule: Direct Plans Become the Default on AMC Apps — What Changes for Your SIP?
Mutual funds · Regulation · India 2026
SEBI’s 1 November Mutual Fund Rule: Direct Plans Become the Default on AMC Apps — What Changes for Your SIP?
New purchases on fund house websites and apps now start on the lower-cost direct plan. Existing regular SIPs are not converted, and choosing regular remains allowed with a cost disclosure.
Open a fund house app this week to start a new SIP and you may notice something different on the scheme page. The plan already selected for you is no longer the regular plan with a distributor’s commission built in. It is the direct plan, which holds exactly the same portfolio and charges less. That small shift on the screen is the visible part of a change SEBI’s chairman announced on 28 October. What it does not do is touch the SIP that has been quietly debiting your account for years. That part is still your decision.
The announcement, and the size of the market it lands on
SEBI chairman Tuhin Kanta Pandey announced the change at the NDTV Profit Ignite event in Mumbai on 28 October 2026. “From November 1, Direct Plans will be the default option on digital platforms of AMCs,” he said, as reported by Upstox, adding that “investors choosing Regular Plans must be informed about their higher expense ratio.” In the same speech he cited SEBI’s investor survey: 63% of households aware of at least one securities-market product, but only about 9.5% participating.
The rule lands on a market at record SIP activity. AMFI data shows SIP contributions reached ₹32,490 crore in September 2026, a new monthly high, while contributing SIP accounts crossed 10 crore in August.
- ₹32,490 crSIP inflow in September 2026, a record
- 10.02 crContributing SIP accounts, August 2026
- 63.26 lakhNew SIPs registered in September 2026
- ₹17.86 lakh crSIP assets at end-September 2026
- 78.5%SIP stoppage ratio in September, down from 81.1%
- ₹82.64 lakh crIndustry assets at end-September 2026
The stoppage ratio, reported by Telangana Today from AMFI data, counts SIPs that ended, including those that simply completed their tenure, against new registrations. It is not the share of investors who gave up.
Direct and regular: same fund, different price tag
Since 1 January 2013, every mutual fund scheme in India has offered two versions. Both hold the same stocks or bonds, have the same fund manager and the same objective. The only difference is cost. A regular plan pays a trail commission to the distributor who sold it, and that commission is built into its expense ratio. A direct plan has no distributor in between, so its expense ratio is lower and its NAV grows slightly faster every day.
- Regular planBought through a distributor, bank or adviser who earns a trail commission. The higher expense ratio is deducted from the NAV, so you never see a bill, which is exactly why many investors underestimate it.
- Direct planBought from the fund house or a platform that does not take commission. Lower expense ratio, same portfolio. You get no hand-holding, so choosing and reviewing funds is your job.
Total expense ratio, % a year, as reported by INDmoney in October 2026. Check the latest figure on the AMC website before deciding.
In all three funds the gap is about 0.61 to 0.62 percentage point a year. On ₹1 lakh invested, that is roughly ₹610 every year, and it compounds because the money not paid away stays invested.
What people get wrong: believing the direct plan is a “different”, riskier fund. It is not. The portfolio, the risk and the fund manager are identical. Only the cost and the service attached to the purchase differ.
Your existing SIP: what happens on its next date
Nothing, unless you act. The rule changes the default for new purchases on the fund house’s own platforms. A regular-plan SIP registered before 1 November keeps debiting and buying regular-plan units as before. Units already held stay in the regular plan.
- Day 0Check your planYour account statement shows “Direct” or “Regular” in each scheme name.
- 1 to 5 daysStart a direct SIPRegister on the AMC app; the new mandate may need a few days to activate.
- Next cycleStop the regular SIPCancel future instalments only; old units stay invested.
- OptionalSwitch old unitsTreated as a sale and purchase, so tax may apply.
Stopping a regular SIP does not sell anything. It only cancels future instalments. Watch the dates so you do not end up with two SIPs debiting in the same month, or a month with none.
Should you move the units you already own?
Switching existing regular units to direct is treated as redeeming one plan and buying the other. For equity funds, gains on units held up to 12 months are taxed at 20% as short-term gains; gains on units held longer are taxed at 12.5% above the ₹1.25 lakh yearly exemption. INDmoney reports that exit loads on regular-to-direct switches within the same scheme were discontinued following an AMFI communication dated 9 April 2025, though implementation varied by fund house.
A practical approach is to switch long-held units in stages, using the ₹1.25 lakh exemption each financial year, and to leave recently bought units until they cross 12 months.
Where the new default applies, and where it doesn’t
The announcement is specific: digital platforms of asset management companies. Many SIPs today are started elsewhere, which matters for what you will see on screen.
| Where you invest | Default before 1 Nov | From 1 Nov 2026 | Your action |
|---|---|---|---|
| AMC website or app | Varied by AMC | Direct pre-selected | Confirm plan on the final screen |
| Regular plan chosen on AMC app | Allowed | Allowed with cost disclosure | Read the expense ratio shown |
| Bank app or relationship manager | Usually regular | Not covered by announcement | Ask which plan you are buying |
| Mutual fund distributor | Regular | Not covered | Weigh the advice against the cost |
| Broker or investment platform | Depends on platform | Not covered | Check plan name before paying |
| Existing regular SIP | Regular | Continues as regular | Decide whether to restart in direct |
| Existing direct SIP | Direct | No change | None |
Upstox and Cafemutual reported the announcement in the same terms. Neither report, nor INDmoney’s, cited a published SEBI circular, so the exact screen design and disclosure wording will depend on how each fund house implements it.
The money maths: what 0.61 point does to a ₹10,000 SIP
Small annual differences become large ones over decades. We assumed a fund earning 12% a year before costs, with a direct plan charging 0.75% and a regular plan 1.36%, the HDFC Flexi Cap figures above. That gives net returns of 11.25% and 10.64% a year. The SIP is ₹10,000 at the start of every month.
Our calculation. Net returns of 11.25% (direct) and 10.64% (regular) assumed for illustration; actual returns vary and are not guaranteed.
Worked example. After 20 years, the direct plan grows to about ₹84.04 lakh and the regular plan to about ₹78.13 lakh, on the same ₹24 lakh invested. The difference, ₹5.92 lakh, is 7.6% of the regular corpus. Over 25 years the gap reaches about ₹13.81 lakh, or 10.1%.
The question this raises is not “is a distributor worth anything?” but “is the service I get worth about 0.6% of my money every year?” For someone who would otherwise panic-sell in a crash, it can be. For someone who picks funds and stays invested alone, it usually is not.
The counter-argument the regulator itself raised
SEBI is not claiming direct plans are right for everyone. Cafemutual’s headline on Pandey’s remarks was that he asked investors to be cautious while buying direct funds. In August, SEBI whole-time member Amarjeet Singh cited data showing that 34% of regular-plan SIP assets had been held for over five years, against 20% in direct plans, as reported by Business Today.
SIP holding data cited by SEBI’s Amarjeet Singh (Aug 2026); folio figures from AMFI as reported by Cafemutual (Sep 2026).
The same AMFI series shows direct folios rising from 6.50 crore in July 2024 to 10.69 crore in July 2026, a 64.5% increase, while regular folios grew 30.4% to 17.39 crore. In the latest year, direct plans added 2.00 crore folios against 1.51 crore for regular. The new default is likely to push that trend further on fund house apps.
Read the holding data carefully. Longer holding in regular plans does not prove that distributors cause discipline. Regular plans are older and many direct investors joined recently. The figure is a reason to know yourself, not a reason to pay more.
How this fits SEBI’s wider cost clean-up
The default switch follows a larger overhaul. The SEBI (Mutual Funds) Regulations, 2026, notified on 16 January 2026 and in force from 1 April 2026, introduced a base expense ratio covering only the fund manager’s fee, with brokerage, securities transaction tax, stamp duty and exchange fees disclosed separately. Brokerage caps were cut to 6 basis points in the cash market from an effective 8.59, and to 2 basis points in derivatives from 3.89, according to Angel One.
- Separate direct plans with lower expense ratios introduced in every scheme.
- AMFI communication leads to removal of exit loads on regular-to-direct switches within a scheme.
- SEBI (Mutual Funds) Regulations, 2026 notified.
- New regulations take effect; base expense ratio and lower brokerage caps.
- SEBI’s Amarjeet Singh cites 34% vs 20% five-year SIP holding data.
- Chairman Pandey announces the direct-plan default at NDTV Profit Ignite.
- Direct plans become the default on AMC digital platforms.
Who should switch, and who might stay regular
The new default helps the investor who was buying from the fund house app anyway and ended up in a regular plan by accident or by an unnoticed pre-selection. That group gains immediately, at no effort.
For investors deliberately using a distributor, the question is value. A good distributor or adviser can help with fund choice, rebalancing, nomination, paperwork and, most importantly, staying invested through a 20% fall. If you are getting that, the cost may be justified. If your only contact is an annual call, the 0.6 point a year is buying very little.
A rough rule for deciding
If you can name your funds, explain why you hold each, and have not stopped an SIP during a market fall, a direct plan is likely the better fit. If any of those is uncertain, consider paying for advice, possibly through a fee-only SEBI-registered investment adviser while investing in direct plans, rather than paying through commissions indefinitely.
A 10-point check for your SIPs this month
- Check every scheme name for “Direct” or “Regular”
- Compare both expense ratios on the same date
- Confirm the plan on the final purchase screen, not the first
- Note each SIP’s debit date before stopping or starting
- Check unrealised gains before switching old units
- Use the ₹1.25 lakh yearly LTCG exemption to switch in stages
- Wait until units cross 12 months to avoid 20% short-term tax
- Check ELSS units for the 3-year lock-in before switching
- Check exit load terms in the scheme document
- Keep Growth or IDCW option consistent when moving
Your questions on the direct-plan default
What is SEBI’s new mutual fund rule from 1 November 2026?
From 1 November 2026, direct plans are the default option when you invest on a mutual fund company’s own website or app. You can still choose a regular plan, but you must be told it has a higher expense ratio.
Will my existing SIP change to a direct plan automatically?
No. Existing regular-plan SIPs and units stay in the regular plan. To move, you need to stop the regular SIP and start a new SIP in the direct plan yourself.
Are regular mutual fund plans being discontinued?
No. Regular plans continue, and distributors can still sell them. The change only alters which plan is pre-selected on AMC platforms.
Is switching from regular to direct taxable?
Yes. A switch counts as selling regular units and buying direct units. For equity funds, gains held up to 12 months are taxed at 20%, and longer-held gains at 12.5% above ₹1.25 lakh a year.
How much more does a regular plan cost?
In large equity funds the gap is commonly about 0.6 percentage point a year. In our illustration, that grows to about ₹5.9 lakh on a ₹10,000 monthly SIP over 20 years.
Does the rule apply to apps like brokers or bank platforms?
As announced, it applies to the digital platforms of asset management companies. Bank apps, brokers and distributor platforms were not included in the announcement.
Is a direct plan riskier than a regular plan?
No. Both plans of a scheme hold the same portfolio and are run by the same fund manager. The difference is cost and whether a distributor’s service is attached.
How do I know whether my SIP is direct or regular?
The scheme name on your account statement, AMC app or consolidated account statement includes the word “Direct” or “Regular”.
The short version for a busy reader
From 1 November 2026, fund house apps and websites pre-select the cheaper direct plan. Your current SIPs do not change on their own. If you invest without advice, restarting future SIPs in direct plans can add lakhs over a long horizon. Switching old units triggers tax, so do it in stages. If you value your distributor’s help, keep it, but know what it costs each year.
