Daily Current Affairs & Trending Topics — Explained Simply
From 1 November 2026, direct plans will be the default option on the digital platforms of asset management companies (AMCs) in India. Securities and Exchange Board of India (SEBI) Chairman Tuhin Kanta Pandey announced the change on 28 October 2026 at the NDTV Profit IGNITE event in Mumbai, and it was reported the next day by The Hindu BusinessLine, Business Today, ET Now and NDTV, among others.
The rule is about what an investor sees first. When someone buys a mutual fund through a fund house's own website or app, the direct plan will now be preselected. If the investor instead chooses a regular plan, the platform must inform them that the regular plan has a higher expense ratio. In Pandey's words, as reported by The Economic Times, "Protection also depends on what investors are told."
The change does not abolish regular plans, and it does not force anyone into a direct plan. It changes the starting point of the choice, and it makes the cost of the alternative visible before the investor decides.
Every mutual fund scheme in India is offered in two versions: a direct plan and a regular plan. Both versions invest in the same underlying portfolio, are run by the same fund manager, and hold the same stocks or bonds. The difference lies entirely in how the plan is bought and what it costs to run.
A direct plan is bought directly from the AMC, without a distributor in between, so no distributor commission is paid out of the scheme. A regular plan is bought through a distributor or intermediary, and the scheme pays that distributor a commission, which is reflected in a higher expense ratio for the regular plan. The total expense ratio, or TER, is the annual cost deducted from the scheme's assets, and it is one of the few things about a fund's future performance that an investor can know in advance.
Because the two plans hold the same portfolio, the direct plan's lower expense ratio means a slightly larger share of the portfolio's returns stays with the investor. Over a single year the gap may look small, but over a long systematic investment plan (SIP) it compounds: a lower annual cost, repeated year after year, leaves more money invested and compounding. That is why SEBI's move matters most to long-term SIP investors, even though it changes no fund's portfolio, manager or investment strategy.
Three things are clear from the announcement as reported. First, the default changes: on AMC websites and apps, the direct plan becomes the option shown first and preselected. Second, disclosure improves: an investor who actively picks a regular plan must be told about its higher expense ratio, so the choice is made with the cost in view rather than discovered later. Third, commission disclosure in statements becomes mandatory: SEBI has also made it compulsory for the consolidated account statement (CAS) to disclose the commission paid to distributors on all SIP transactions made through regular plans.
The scope of the announcement matters, and it is worth stating precisely. The default-plan change as announced refers to the digital platforms of AMCs themselves — their own websites and apps. The reports do not establish that every independent or third-party investment platform will adopt the same default, and investors buying elsewhere should check what default that particular platform shows. The announcement also does not say that existing investments will automatically switch from regular to direct plans. An investor whose SIP has been running in a regular plan should not assume it will change on its own on 1 November.
The Hindu BusinessLine, reporting the announcement, set out the trail commissions that mutual fund distributors earn, which explain why regular plans cost more. On equity schemes, distributors earn trail commissions of 0.50 to 1.17 per cent; on ELSS tax-saving funds, 0.70 to 1 per cent; on hybrid and balanced advantage funds, 0.50 to 0.80 per cent; and on debt funds, 0.20 to 0.50 per cent. These are ranges, not a single fixed rate, and the exact expense ratio differs from scheme to scheme — but they show why the gap between a direct and a regular plan of the same scheme is typically a fraction of a per cent a year, and why it is largest in equity and tax-saving funds.
That gap is the price of distribution and advice. It is not, by itself, evidence that a regular plan is a bad choice or that a direct plan is right for everyone. It is a cost, and SEBI's point is that the investor paying it should see it clearly. The new CAS disclosure serves the same purpose for investments already made: an investor in a regular-plan SIP will now be able to see, in a single consolidated statement, what commission has been paid to the distributor on those transactions.
The investors most directly helped by the change are those who already buy directly from AMCs but may not have realised that a lower-cost version of the same scheme existed, or who simply accepted whichever option a platform presented first. For them, the new default removes a small but real friction: the cheaper option is now the one they land on without having to hunt for it.
Investors who value advice, help with paperwork, portfolio reviews or a single point of contact may still prefer a regular plan, and nothing in the announcement stops them. A distributor who helps an investor stay invested through market falls, choose suitable schemes or handle documentation is providing a service, and the regular plan is how that service is paid for. What changes is that this service can no longer be bought by default or by accident: the investor must actively choose it after being told it costs more.
For distributors, the change raises the bar on demonstrating value. When the lower-cost option is the default and the commission is disclosed in the account statement, a distributor's case has to rest on the quality of advice and service rather than on being the preselected route. For AMCs, it means redesigning their websites and apps so that the direct plan is the default and the regular-plan cost warning is clear rather than buried in fine print.
Pandey used the same event to outline a broader set of SEBI reviews, and these give context to the direct-plan change, even though they are not final rules yet. He said SEBI is reviewing the frameworks governing main-board initial public offerings (IPOs), follow-on public offers (FPOs), SME IPOs and the Innovators Growth Platform, and that it will soon issue a consultation paper on foreign portfolio investor (FPI) rules, working with the Reserve Bank of India to make the process for foreign investors faster and easier. He also said SEBI is examining net settlement for mutual fund transactions, which would streamline fund flows, and considering bringing the listing timelines for real estate investment trusts (REITs) and infrastructure investment trusts (InvITs) in line with those of equities.
These are reviews and examinations, not decisions, and they should not be read as immediate changes for investors. Their common thread, however, is the same as the direct-plan rule: reducing friction and making costs and processes more transparent. The direct-plan change is simply the one with a fixed date — 1 November — and a direct effect on what retail investors see when they invest.
First, check which plan your existing investments are in. The plan name on your AMC statement or in your CAS will say "Direct" or "Regular". If it says regular, your investment will not automatically move to direct, and switching is a separate decision with its own consequences, including possible exit loads and tax on redemption, depending on the scheme and holding period. Do not switch in a hurry because a default has changed; understand the costs of switching first.
Second, compare expense ratios for the same scheme, not across different schemes. The meaningful comparison is the direct and regular plans of one scheme, side by side. A direct plan of a high-cost scheme can still cost more than a regular plan of a low-cost scheme, so the plan label alone does not tell you whether a fund is cheap overall.
Third, when you next invest through an AMC website or app, notice the default. From 1 November it should be the direct plan. If you deliberately choose the regular plan, you should now be shown its higher expense ratio — and if you are not, that disclosure itself is worth asking about. Finally, read your next consolidated account statement for the distributor commission on regular-plan SIPs. That single figure, more than any general debate about direct versus regular, tells you what you are actually paying for distribution.
SEBI's direct-plan default is a small design change with a large principle behind it: the cheapest version of a product should be the one an investor sees first, and the costlier version should only be chosen knowingly. From 1 November 2026, that principle applies on every AMC's own website and app. It does not change any fund's portfolio, it does not switch existing SIPs on its own, and it does not remove the regular plan for investors who want advice and are willing to pay for it. What it does is put the cost of that advice in front of the investor, in the plan selection screen and in the account statement, before the decision is made. For India's millions of mutual fund investors, many of them SIP investors building wealth a month at a time, that visibility is the real reform — and it arrives just as a new month of SIPs begins.
This article is for general information only and is not investment advice. Mutual fund investments are subject to market risks, and investors should read all scheme-related documents carefully before investing.
From 1 November 2026, direct plans become the default option on the digital platforms of asset management companies (AMCs) — their own websites and apps. Investors who choose a regular plan instead must be informed about its higher expense ratio, as announced by SEBI Chairman Tuhin Kanta Pandey on 28 October 2026.
Both plans are versions of the same scheme with the same portfolio and fund manager. A direct plan is bought directly from the AMC with no distributor commission, so its expense ratio is lower. A regular plan is bought through a distributor, whose commission is included in the scheme's costs, making its expense ratio higher.
No — nothing in the announcement says existing investments will automatically switch. A regular-plan SIP will keep running as before unless the investor takes a separate decision to switch, which may involve exit loads and tax implications depending on the scheme and holding period.
The announcement as reported refers specifically to the digital platforms of AMCs themselves. It does not establish that every independent or third-party platform will show the same default, so investors buying elsewhere should check what default that platform presents.
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