The Securities and Exchange Board of India has directed mutual funds to make direct plans the default option on their websites from 1 November 2026. The move, which changes what investors see first when they visit a fund house’s website, is aimed at ensuring that investors who buy directly are not steered by default into higher-cost regular plans.
The distinction between direct and regular plans is one of the most important, and least understood, features of mutual fund investing in India. Both versions of a fund hold the same portfolio and are managed by the same fund manager, but direct plans carry a lower expense ratio because they do not pay distribution commission to intermediaries. Over long periods, even a small difference in annual costs can compound into a substantial difference in returns.
Until now, many investors who visited a fund’s website and clicked through to invest could find themselves in a regular plan by default, paying commission even though no distributor had advised them. The regulator’s decision reverses that logic: from November, the default presented to a direct website visitor will be the direct plan, and anyone who wants a regular plan will have to choose it actively.
For investors, the change is a welcome step towards transparency. Mutual funds have grown rapidly in India, attracting millions of first-time investors, many of whom invest through apps and websites without fully understanding the fee structures behind their choices. Making the cheaper option the default protects those investors from an inadvertent cost, and it aligns the online journey with the principle that a customer who does the work themselves should not pay for advice they did not receive.
Distributors and financial advisers, meanwhile, will need to demonstrate their value more clearly. Genuine advice, financial planning and hand-holding during market volatility remain valuable services, and investors who want them should still choose regular plans willingly. What the new rule removes is the quiet default that channelled investors into commission-paying plans without a conscious decision. Advisers who earn their fees through service rather than inertia should have little to fear.
Fund houses will have to update their websites, application forms and investor journeys to comply with the direction. The change may also prompt a broader conversation about how mutual funds are sold in India, including the disclosures that accompany both direct and regular options and the ease with which investors can switch between them.
The timing is significant. As mutual fund penetration deepens beyond the metros and into smaller towns, the investors entering the market are often less familiar with industry jargon. Defaults matter enormously in such a setting: most people accept the option presented to them, and regulators around the world have increasingly recognised that setting the right default is one of the most powerful consumer-protection tools available.
For existing investors, the direction is a prompt to check their own holdings. Anyone who invested directly through a fund website but holds regular plans may wish to review whether they are paying commission unnecessarily, and whether switching to a direct plan suits their needs. As with any investment decision, costs are only one part of the picture, but they are the one part that is entirely within the investor’s control.
From 1 November, the mutual fund website will, by default, show investors the cheaper path first. It is a small change in design with potentially large consequences for millions of portfolios, and a reminder that in personal finance, the fine print and the default settings deserve as much attention as the returns themselves.
