SEBI’s Latest Reforms: B30 Incentives, Exit Loads, REIT/InvIT Classification & More

In a major policy overhaul aimed at improving investor protection, widening mutual fund penetration and streamlining regulations, SEBI (the Securities and Exchange Board of India) has rolled out several fresh measures. Key among them is the reintroduction of B30 incentives for mutual fund distributors (MFDs), after an absence of about 30 months. These moves were approved at SEBI’s board meeting in Mumbai.

Here’s a detailed look at what has changed — and what to watch out for.

What are B30 Incentives & What’s New

  • What’s B30?
    “B30” refers to cities beyond the Top 30 (the major metropolises). SEBI has long sought to drive mutual fund adoption in smaller towns and rural areas.

  • Key change now: SEBI has reinstated the B30 incentive structure.

  • Incentive formula: Mutual fund houses (AMCs) will be allowed to pay a flat fee of 1% of either
    a) the first (lump-sum) application amount, or
    b) the total committed amount in the first year of a Systematic Investment Plan (SIP)
    — subject to a maximum of ₹2,000 per investor.

  • Who qualifies:

    • New investors from B30 cities.

    • Women investors across all locations.

  • What about prior misuse / delays: The B30 incentive was earlier suspended due to concerns about misuse (splitting of transactions, churning, etc.) and lack of adequate systems to monitor those.

  • Funding / source: There are references that the incentive might be funded out of the IAP corpus (1 bps retained by AMCs for investor awareness) or similar sources.

Other Important Measures from SEBI’s Board Meeting

Alongside the B30 incentive, several other regulatory tweaks were approved:

  1. Exit Load Reduction
    The maximum permissible exit load that mutual fund schemes can charge has been reduced from 5% to 3%.
    (Note: Many funds already charge 1-2% in exit loads in practice, so this aligns regulation more closely with common industry practice.

  2. REITs & InvITs Classification

    • Real Estate Investment Trusts (REITs) will now be classified as “equity instruments”. This change will allow mutual funds to include them more readily in their equity allocations, permit inclusion in equity indices etc.

    • Infrastructure Investment Trusts (InvITs) will be classified as hybrid instruments, rather than pure equity.

  3. Eligibility, Investor Caps, Ticket Sizes etc.

    • AMCs will be able to launch AIFs (Alternative Investment Funds) schemes exclusively for accredited investors, with no cap on the number of investors. This is a change from standard AIFs which have a limit of 1,000 investors.

    • The minimum ticket size for Large Value Funds (LVFs) is being reduced from ₹70 crore to ₹25 crore.

  4. RIAs (Registered Investment Advisers) Revisions

    • RIAs will now be allowed to provide second opinions on existing assets and charge fees for such services; they must, however, disclose that clients may end up paying fees or commissions twice if applicable.

    • Eligibility criteria for becoming an RIA have been relaxed: now even graduates (without higher or specialized degrees) can qualify to be RIAs.

Implications & What to Watch

  • Increased Financial Inclusion:
    The B30 incentive + women investor incentives aim at bringing more people into the investment fold from smaller towns and underrepresented groups. This could help deepen mutual fund penetration.

  • Distributor/AMC Incentive Structures Need Safeguards:
    Given past misuse (transaction splitting, churning etc.), implementation will be key. SEBI and AMCs will need strong systems to prevent abuse while ensuring that benefits reach genuine investors/distributors.

  • Investor Protection vs Flexibility:
    Reducing exit loads protects investors, especially from high exit charges, but will require funds to balance liquidity and scheme design so that they can still meet obligations (especially in less liquid asset classes).

  • Regulatory Ease & Access:
    The relaxed norms for RIAs, the classification changes for REITs/InvITs, and lower ticket sizes for LVFs can help widen access to more investment avenues for both retail and high net-worth investors.

  • Potential Complexity / Disclosure Requirements:
    With new fee disclosures (for RIAs charging second opinions etc.), new incentive rules, and classifications, there may be more compliance and transparency obligations. Investors (and especially distributors/advisers) will need to keep abreast of the details.

Conclusion

SEBI’s recent board meeting marks a significant push toward making capital markets and mutual funds more inclusive, transparent, and investor-friendly. Reintroducing B30 incentives (with clearer rules), reducing maximum exit loads, reclassifying REITs, easing norms for RIAs—all these suggest a regulatory shift to lower barriers and better align practices with what’s occurring on the ground.

That said, the success of these reforms will depend greatly on how they are operationalized. Monitoring misuse, clear disclosure, and robust implementation will be crucial to ensure that the intended benefits reach genuine distributors and investors, especially in B30 cities and among women.

SEBI’s Latest Reforms