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CHAPTER 4
CHAPTER 7
CHAPTER 8
TAXATION
CHAPTER 9
INVESTOR SERVICES
CHAPTER 10
RISK, RETURN AND PERFORMANCE
CHAPTER 11
MUTUAL FUND SCHEME PERFORMANCE
CHAPTER 12
MUTUAL FUND SCHEME SELECTION
CHAPTER 6
FUND DISTRIBUTION AND CHANNEL MANAGEMENT PRACTICES
LEARNING OBJECTIVES:
After studying this chapter, you should know about:
Role and importance of mutual fund distributors
Different kinds of mutual fund distributors
Modes of distribution
Pre-requisites to become a mutual fund distributor
Revenue of a mutual fund distributor
Commission disclosure mandated by SEBI
Due Diligence Process by AMCs for Distributors of Mutual Funds
Nomination facilities for mutual fund distributors
Change of distributors
6.1 The role and importance of mutual fund distributors
An investor needs to invest the money in a portfolio of various investment options to achieve financial goals. This process of building a portfolio could be achieved with the help of the selection of a basket of mutual fund schemes. However, one may still need help in constructing a portfolio with the help of an expert. This expert could be a mutual fund distributor.
CHART 6.1: MUTUAL FUND INVESTORS, PROFESSIONALS AND PORTFOLIO
Investor Mutual fund distributor Fund manager Portfolio
In Chart 6.1, two professionals have been shown between the investor and her investment portfolio, viz., a mutual fund distributor, and a fund manager. This fund manager could be a mutual fund manager managing a mutual fund portfolio in line with the scheme’s investment objectives, as discussed earlier.
The fund manager analyses various inputs and data points including the company specific or industry specific information, and economy wide factors. The analysis may include about liquidity aspects in the market, and the mood of the market participants. After such a detailed analysis, the fund manager constructs a portfolio of securities in line with the stated objective of the mutual fund scheme.
On the other hand, the mutual fund distributor’s job is to assess the needs, limitations, resources and financial goals of the investor. This analysis would help the mutual fund distributor arrive at a suitable asset allocation plan for the investor. Armed with this, the distributor then goes on to identify mutual fund schemes, which are appropriate for the investor in the given situation.
Look at this in another way, the mutual fund distributor analyses the situation of the investor; whereas the fund manager analyses the market factors. Both the professionals play important roles in helping the investor achieve one’s financial goals.
With that background look at various categories of mutual fund distributors.
6.2 Different kinds of mutual fund distributors
Mutual funds are distributed in India to the investors through multiple channels, viz., individual mutual fund distributors, bank branches, national distributors through their branches or their sub-agents, post offices, and directly by the AMCs. While the category of distributors is also varied, the platforms used are also many. Funds may be distributed through the traditional method of using paper-based application forms, or through electronic platforms such as websites, mobile phones and stock exchanges.
Let us first look at the different categories and their characteristics.
6.2-1 Individual players
India has a long history of distribution of financial products through individuals. Both Life Insurance Corporation of India Ltd. (LIC), and Unit Trust of India (UTI) depended on a huge force of individual agents. While the two institutions made various products and solutions available, the agency force (i.e., individual agents) ensured these products reached the households. These same agents also distributed the small savings products, and to that extent, they played a huge role in bringing household savings into financial products.
Almost all of them operated as individuals, and single-handedly, without any staff or skeleton staff, mainly to handle the paperwork. Even today, this is a very large part of the distribution link between the asset management companies and the investors. Quite a few new mutual fund distributors start their business this way –single-handedly, as individuals.
Later, some of them expand and grow into larger entities. While the former is known as the “individual” channel, the rest can be called the “non-individual” channel. The traditional non-institutional channels operate through different business models. These could be as under:
Through their own branch offices and employees
Through a network of sub-agents
6.2-2 Non-individual entities
Non-individual entities include partnerships, regional distributors, national distributors, NBFCs, banks, stockbrokers, etc. Out of these, the distribution companies and banks are sometimes referred as institutional distributors. In both cases, the investor is serviced by an individual—be it an employee of the firm or a sub-agent. However, the difference lies in the operations of the firm and its cost structure—the former incurs fixed expenses of running the large operations, whereas the latter have higher variable costs. The employees earn through salary, whereas the sub-agents earn a commission, which is linked to the business generated. Within the non-individual distributors, there are different business models.
Banks
Banks have emerged as a prominent channel for the distribution of mutual fund products to their account holders. Within the banking structure, the multinational banks were the first to enter the business of mutual fund distribution. The private sector banks and the public-sector banks entered the business much later. Nowadays, even some cooperative banks are also distributing mutual funds. Banks employ different business units catering to different client segments, viz., retail banking and wealth management or priority banking or private banking. The categorization is based on the wealth of the clients or the surplus available for investment in financial assets.
Mutual funds have built relationships with PSU banks that have a wide reach in non-urban centres to distribute mutual fund products through them. Also, private and foreign banks actively participate in the distribution process of mutual fund products.
Many others like stock brokers and NBFC also use a similar classification between retail clients and wealthy clients. While some NBFCs and stock brokers reach out to service their clients through their own employees, some have empaneled subagents. One may also call it an agency channel. These sub-agents are not employees of the firm but purely work as an extended distribution arm.
While the banks and NBFCs may operate at a national level, there could be some other firms that only distribute financial products. Some of these firms may have a national presence, while some others may operate within a region. These are often referred as national distributors or regional distributors in the mutual fund industry.
Some new players have entered the fray of late. These are the e-commerce platforms and few other online distributors that also distribute mutual fund schemes. These players operate through the internet without having a physical office for the clients to visit. SEBI has provided the guidelines for Execution Only Platforms (EOP), relevant for digital/online platforms.
6.3 Modes of distribution
Traditionally, not just mutual funds, but all financial products were distributed through the use of application forms printed on paper. This process involved carrying physical forms to the client’s place and then depositing those forms at the
respective official points of acceptance (OPOAs). With the advent of the internet and mobile phones, the distribution channel shifted to digital mode. Of late, the balance is shifting towards digital transactions, though the physical paper-based transactions continue in a significant way.
Many distributors and their investors still prefer the paper mode, whereas the new age Internet-based businesses, viz. e-commerce platforms, and online distributors operate entirely through the digital mode.
On the other hand, there are a few that employ a hybrid mode, where some transactions take place digitally, some others happen physically.
The different models of online distribution are discussed below:
6.3-1 Online Channel Partners
The advent of the internet has changed the way business is conducted in many industries, and mutual fund distribution is no different. The distributors are able to expand their business beyond geographical boundaries. Investors, also prefer to transact through the internet, rather than the cumbersome paperwork and dependence on the distributor. A few distributors offer transaction support through their own websites.
6.3-2 Stock Exchange Platforms
SEBI has facilitated buying and selling of the units of open-ended mutual funds through the stock exchanges. Exchanges have developed mutual fund transaction engines for this purpose. The low cost and deeper reach of the stock exchange network enable an increased level of participation of retail investors in mutual funds. AMCs are required to list the units of close-ended and interval schemes on a stock exchange and the units of ETFs are also bought and sold in the stock exchange. Both National Stock Exchange (NSE) and Bombay Stock Exchange (BSE) have extended their trading platforms to help the stock exchange brokers become a channel for investors to transact in Mutual Fund units. NSE’s platform is called NMF II Platform. BSE’s platform is the BSE StAR Mutual Funds Platform. NMF II platform of NSE has two versions one for trading members and one for distributors. All trading members of the stock exchange who have registered with
AMFI as Mutual Fund Distributor and have signed up with the respective mutual fund can offer transactions through this facility to their investors. The units can also be transacted on these platforms through clearing members of the stock exchange. Depository participants can process redemption requests only. The list of eligible schemes for transaction on these platforms are notified by the respective mutual funds. These eligible schemes are not listed on the stock exchange. Similarly, distributors having valid AMFI registration can seek limited purpose membership of the Exchange to transact in Mutual Fund units only.
The stock exchanges only offer a transaction platform, but they do not replace the RTAs. Since this is essentially an order routing system between the investors and the AMC, the exchanges do not offer settlement guarantee. Responsibility for settlement is with the AMC. However, the normal stock exchange redressal mechanism would be available to address any investor complaints.
SEBI vide its circular dated February 26, 2020, has allowed the investors to directly access the infrastructure of stock exchanges to purchase and redeem mutual fund units directly from the mutual fund/asset management companies. There is an element of convenience that is available for investors when they transact mutual fund units on the stock exchange. This is because the entire system is seamless and the investor is familiar with it. In case of stocks, the investor needs to enter their order details either through their broker or online and these are routed to the stock exchange and then executed. The same route is followed for mutual fund units where the investor is able to transact seamlessly and get the units in their demat account.
One of the main features of this platform is that the distributor only handles the transactions of the investor. The rest of the process, including the pay in and payout of money as well as the units, takes place through the stock exchange infrastructure. This involves the clearing corporation too.
The beneficial part of this entire system is that apart from the normal purchase and sale of units there is also the facility of undertaking a SIP which is a very crucial way of investing for investors. STP and SWP transactions apart from a switch are also possible on the stock exchange. The ease of making the investment and the facility offered is also a reason why the investor might find this an attractive route to invest.
6.3-3 MF Utilities
MF Utilities (MFU) is a transaction aggregating platform that connects investors, RTAs, distributors, banks, AMCs and others. MFU facilitates the distributors with online access to submit investor transactions. This platform provides them with a single point for time-stamping of transactions, document submission, paperless transaction facility, and login facility for their clients.
Investors who register on the MFU are allotted a Common Account Number (CAN) under which all their mutual fund holdings are consolidated. Investors have to be KYC compliant to register for a CAN. If an investor is not already KYC compliant, then the MFU will facilitate KYC registration along with the allotment of ‘CAN’.
The MFU offers a Common Transaction Form to transact in multiple schemes across participating mutual funds using a single form. The form can be submitted through a mutual fund distributor or to neutral Points of Service (PoS) and others irrespective of the RTA servicing the mutual fund. MFU offers multiple modes of payments for investment through physical and electronic means. MFU allows a single payment for multiple subscriptions made under a single form. The existing mutual fund holding is mapped to the CAN based on PAN, holding pattern and other parameters. Investors may have multiple CANs based on the combination of holdings and mode of holding. Investors can also request online access through which they can submit transactions, view holdings and lodge and track complaints. The bank and nomination details provided to the MFU at the time of registering for the CAN will override the information provided in the folios.44
MF Central is a unified digital platform developed by India’s largest registrars, CAMS and KFintech, under SEBI mandate, to act as a single-window portal for all mutual fund investments. It provides a consolidated view of holdings across different AMCs, enables digital service requests (like updating contact/bank details, nomination), and facilitates financial transactions.
44 In order to make it more convenient to the existing and future investors to transact and avail services while invested in Mutual Funds SEBI has decided that the RTAs shall implement standardized practices, system interoperability amongst various stakeholders to jointly develop a common industry wide platform that will deliver an integrated, harmonized, elevated experience to the investors across the industry. AMCs and Depositories are advised to facilitate the RTAs for development of the platform. (The platform is operational since 31st December 2021). Read more at: https://www.sebi. gov.in/legal/circulars/jul-2021/circular-on-rta-inter-operable-platform-for-enhancing-investors experience- in-mutualfund-transactions-service-requests_51395.html
Key Functions of MF Central
Consolidated Portfolio View: View all mutual fund folios across different AMCs, including both Demat and Non-Demat holdings, in one dashboard.
Service Requests: Allows, via the MFCentral portal, paperless updates for bank mandates, email/mobile numbers, KYC, and nominee details.
Financial Transactions: Perform transactions such as purchasing (lumpsum/ SIP), redemption, and switching of mutual fund schemes.
Folio Management: Consolidate multiple folios, update details for minors turning adults, and update FATCA/CRS declarations.
Data Access: Generate Consolidated Account Statements (CAS) and view information on unclaimed dividends or bonuses.
Family Portfolio Tracking: Enables users to consolidate and track investments of family members under one profile.
6.3-4 Computer-based and Mobile-based Apps offered by distributors
Apart from the above platforms and the websites of distributors, the transaction facilities are now available on mobile devices –smartphones, feature phones, and tablet computers. This makes it even more convenient than going to a website. These are through apps that are created by distributors in order to facilitate investments for their clients. These multiple channels make it easier for clients to transact in a simple manner.
6.3-5 Electronic platforms created by the AMCs
Apart from the above, various AMCs have also created their own facilities like webbased and mobile-based applications that facilitate various transactions. Many AMCs also offer transaction facilities through SMS and WhatsApp. When an investor uses these platforms then they are dealing directly with the mutual fund.
6.3-6 New age investment platforms
The Indian investors have also seen the emergence of new-age investment platforms. These are technology-based platforms that allow investors to invest in mutual
funds apart from other areas like stocks, bonds etc. One of the key features of these platforms is the simplicity of investment without the hassle of too much paperwork plus its low cost. On many of these platforms, investors can buy direct plans of mutual funds too. These are available through both websites as well as apps so it also becomes simple to interact. Examples of these include Groww, Kuvera, Paytm money, Coin etc.
6.4 Pre-requisites to become Distributor of a Mutual Fund45
An Asset Management Company may appoint an individual, bank, non-banking finance company or distribution company as a distributor. SEBI has mandated mutual fund distributors, agents or any persons employed or to be employed in the sale and/or distribution of mutual fund products, to have a valid certification from the National Institute of Securities Markets (NISM) by passing NISM Series-V-A: Mutual Fund Distributors Certification Examination.
Any entity engaged in sale and/or distribution of mutual fund products, shall also be eligible to offer products under the SIF, subject to such entity fulfilling additional eligibility criteria as specified by SEBI.
In order to be eligible to sell or market mutual funds, the following are compulsory:
Obtaining NISM Certification
The individual needs to pass the NISM certification examination mandated by SEBI.
For persons who have attained the age of 50 years or who have at least 10 years of experience in the securities markets in the sale and/or distribution of mutual fund products as of May 31, 2010, can obtain the certification either by passing the NISM certification examination or qualifying for Continuing Professional Education (CPE) by obtaining such classroom credits as may be specified by NISM from time to time.46
45 Candidates may read about, “become a mutual fund distributor” at https://www.amfiindia.com/distributor-corner/ become-mutual-fund-distributor
46 SEBI Gazette Notification Ref. No. LAD-NRO/GN/2010-11/09/6422 dated May 31, 2010. http://www.nism.ac.in/nism18042016/index.php/circulars/173-sebi-notification-on-nism-series-v-a-mutual-fund-distributors dated-may-31-2010
MUTUAL FUND DISTRIBUTORS
AUTHOR : National Institute of Securities Markets (NISM) | An Educational Initiative of SEBI
PUBLISHER : Taxmann
DATE OF PUBLICATION : June 2026
EDITION : Workbook Version - March 2026
ISBN NO : 9789375610212
NO. OF PAGES : 388
BINDING TYPE : Paperback
Rs. 585
DESCRIPTION
Mutual Fund Distributors by NISM is a complete working text on the Indian mutual fund business. It takes the reader from investment first-principles—goals, asset classes, risk and asset allocation—through the legal and regulatory framework, disclosure documents, distribution practice, NAV, expenses, pricing and taxation, to investor servicing, risk-and-return measurement, performance evaluation and scheme selection. The treatment is current with the latest SEBI frameworks and built to be used, with worked examples, illustrative boxes and end-of-chapter questions throughout.
This book is intended for the following audience:
• Individual Mutual Fund Distributors and Aspirants
• Employees of Organisations Engaged in the Sale and Distribution of Mutual Funds
• Employees of Asset Management Companies (AMCs)
• Relationship Managers and Front-Office Staff
• Students and Job Aspirants
• Existing Intermediaries and Trainers
The Present Publication is the March 2026 Workbook Version, developed in collaboration with the NISM Certification Team and NISM Resource Persons, Mr Sundar Sankaran, Ms Sunita Abraham and Mr Amit Trivedi. It is published exclusively by Taxmann, with the following noteworthy features:
• [Official Prescribed Text] The official NISM workbook on which the examination is largely based
• [Current Regulatory Framework] Aligned to the SEBI (Mutual Funds) Regulations 2026 and the 2026 Categorisation and Rationalisation circular, with SEBI's five-category framework built in
• [Updated Cost Structure] Reflects the cost structure effective 1st April 2026—base expense ratio, execution brokerage within limits and statutory levies
• [Latest Taxation Position] Captures the July 2024 capital-gains regime—the 12/24-month holding split, revised rates, the ₹1.25 lakh LTCG exemption on equity, and grandfathering as on 31st January 2018
• [New Scheme Structures] Covers the MF Lite framework for passive schemes and the Specialised Investment Fund (SIF) product line
• [Worked Numerical Illustrations] Step-by-step computations (NAV, returns, standard deviation), set up for Excel or LibreOffice Calc as used at the test centre
• [Concept Boxes and Self-Assessment] Explanatory boxes (such as ETFs and stamp duty on units) and sample questions in every chapter
• [Weightage-Based Study Guidance] A syllabus outline with unit-wise weightages to direct effort to the highest-scoring areas
• [Reference Appendices] Regulatory text, the AMFI codes, and a curated list of additional resources