SEBI has mandated that from Nov 1, direct mutual fund plans will become the default option on all AMC digital platforms, forcing regular plans to be clearly flagged for their higher expense ratios.
Direct plans are purchased without a distributor, so they cut out the commission layer that regular plans add to the fund's expense ratio. The difference can be significant over long horizons, especially when compounded over years.
The change may redirect flows toward lower‑cost direct schemes, tightening the spread between Net Asset Value and NAV for investors. Analysts note that the policy could reduce the average expense ratio of all schemes by a few basis points, but the exact lift depends on how many investors switch.
The directive, issued by SEBI Chairman Tuhin Kanta Pandey on Oct 28, does not yet clarify whether third‑party platforms must adopt the new default or how the disclosure will appear on individual AMC apps. Some AMCs have already updated their interfaces, but a full rollout is expected by end‑November.
AMCs are expected to issue detailed guidelines in the coming weeks, and investors will need to monitor their own expense ratios closely. The move aligns with SEBI's broader push for greater transparency and could influence how other asset‑management firms price distribution services.