Direct Mutual Funds Default From Nov 1: Your SIP Checklist

From 1 November 2026, when you buy a mutual fund on a fund house's own website or app, the direct plan will be shown as the default option. SEBI Chairman Tuhin Kanta Pandey announced this on 28 October 2026 at NDTV Profit IGNITE in Mumbai. If you choose a regular plan instead, the platform must tell you its expense ratio is higher. Nothing in the announcement automatically switches your existing SIPs, and regular plans are not being abolished — the change is about what you see first, and what you are told before you choose.

A direct plan and a regular plan of the same scheme hold the same portfolio, are run by the same fund manager, and carry the same market risk. The difference is distribution. A regular plan is sold through a distributor, bank or adviser, and the commission paid to that intermediary sits inside the plan's expense ratio. A direct plan is bought straight from the asset management company (AMC), with no distributor commission, so its total expense ratio (TER) is lower. That is the whole mechanism — there is no separate "direct fund" to research. If you already know a scheme, the direct-versus-regular question is only about how you buy it and what that route costs you each year.

Three things, all on AMC digital platforms — the fund house's own website or app: - Direct is the preselected option. A new investor starting on an AMC platform will see the direct plan first. - Regular-plan buyers get a cost warning. Anyone who picks the regular plan must be informed that its expense ratio is higher. - Commissions become harder to miss. SEBI has also pushed for distributor commission on regular-plan SIP transactions to be disclosed in consolidated account statements (CAS), so the cost appears in a statement you already receive. Two important limits. First, the announcement as reported refers to AMC platforms specifically; it does not establish the same default for every bank app, distributor portal or broker platform, so check the platform you actually use. Second, as of 30 October, no separate public circular detailing the change had been independently located — the announcement rests on the Chairman's 28 October address, published on SEBI's website. Treat implementation details as subject to each AMC's notice.

Your existing SIPs do not automatically convert. A regular-plan SIP started through a bank or distributor keeps running as a regular-plan SIP until you take a separate step. Regular plans continue to exist, and investors who value distributor or adviser service can still choose them — they will simply be told the cost difference first. Switching is also not free of consequences, which is why the "just switch everything" shortcut is risky. Moving an existing regular-plan investment to the direct plan of the same scheme generally means redeeming units in the regular plan and buying units in the direct plan. That redemption can trigger capital gains tax and, where applicable, an exit load, depending on the scheme and how long you have held it. The tax and load question should be checked before any switch, not after.

How much does the gap matter? Take one published example: as of 28 October 2026, HDFC Flexi Cap Fund's TER was 0.75% for the direct plan and 1.36% for the regular plan — a gap of 0.61 percentage points a year. TERs change, so check your own scheme's current figure rather than memorising this one. Now apply that gap as an illustration, with the method stated plainly. Assume a ₹10,000 monthly SIP, a gross return of 12% a year before expenses, and the 0.61-point gap above: the direct plan nets 11.25% a year and the regular plan 10.64% a year. Over 20 years, the direct illustration reaches about ₹90,31,952 and the regular illustration about ₹83,28,451 — a difference of roughly ₹7,03,501 on ₹24,00,000 invested. At 10 years the gap in the same illustration is about ₹78,279; at 15 years, about ₹2,62,168.

These are assumed illustrations, not predictions or promises: real returns vary, TERs change, and the gap compounds only if the expense difference persists. The point of the maths is narrower — a cost that looks small in a single year, around 0.6% in this example, is not small over a 20-year SIP. That is exactly why SEBI is making the cheaper option the visible default.

You do not need a new app to find out what you hold. Open your latest consolidated account statement (CAS) and look for two things: whether each holding is labelled "Direct" or "Regular", and the distributor commission disclosed on regular-plan SIP transactions. If you cannot find the label, check the same scheme on the AMC's website — the plan name itself carries the word Direct or Regular — or ask the platform you bought through. Then ask three questions before deciding anything: Is the service behind the regular plan's commission something you actually use — advice, paperwork help, a single dashboard? Would switching trigger tax or an exit load that wipes out more than a year or two of the cost saving? And is the gap for your specific scheme closer to 0.2% or over 1%? Distributor trail commissions reported for equity schemes range from 0.50% to 1.17%, so the answer varies a lot by scheme. A small gap with a service you value is a different decision from a 1% gap for no service at all — and neither answer is right for everyone.

Educational content only — not financial advice. Consult a SEBI-registered investment adviser for personal guidance; investments are subject to market risk.

Sources: SEBI Chairman Tuhin Kanta Pandey's address at NDTV Profit IGNITE, Mumbai, 28 October 2026, as reported by Moneycontrol, The Hindu BusinessLine and Business Today; IndMoney explainer, 30 October 2026 (HDFC Flexi Cap TER 0.75% direct / 1.36% regular as of 28 October 2026).