Over 63% of retail mutual fund AUM is in regular plans: Why is SEBI pushing direct plans? Experts explain pros and cons

SEBI Makes Direct Plans Default

From 1 November, direct plans of mutual fund schemes will be the pre-selected option when investors begin a systematic investment plan on an asset management company's own digital platform. SEBI Chairman Tuhin Kanta Pandey announced the change at NDTV Profit IGNITE. Investors who still opt for a regular plan will have to be told about its higher expense ratio. Direct and regular plans hold identical portfolios under the same fund manager; the difference lies in cost. Regular plans carry distribution-related expenses, which push up the expense ratio and drag on returns over time.

Why Regular Plans Still Dominate

Data from the AMFI-Crisil Factbook 2026 shows retail mutual fund assets of ₹18.95 lakh crore as of March 2026, with 63.3% in regular plans and 36.7% in direct plans. Experts quoted in the report attribute this to distribution. Harsh Vardhan Dawar of Wealth Cafe notes that mutual funds and insurance remain push-products sold to investors rather than bought by them, which explains the skew. Vedant Gupte of Trackk says the regular-plan share reflects entry through distributors, not investor preference, a pattern that has persisted since direct plans were introduced in 2013.

What It Means For Intermediaries

The rule targets AMC digital platforms and may extend to industry platforms, according to Dawar. Existing investments do not switch automatically. For distributors, the shift forces a clearer articulation of value — asset allocation, rebalancing and keeping clients invested through downturns — since the cheaper option will now be visible by default. Gupte notes that first-time investors running small SIPs on AMC apps and those comfortable selecting funds stand to gain, while investors who rely on advisers can stay in regular plans with better cost visibility. Because expense differences compound over 15 to 20 years, the default matters for long-horizon outcomes. Inflows into mutual funds are unlikely to be materially affect…