A Regular Plan is purchased through a distributor or financial advisor, who earns an annual commission from the fund house — this cost is embedded in the scheme's higher expense ratio.
Every mutual fund scheme in India offers two plan variants: Direct Plan (invested directly with the AMC) and Regular Plan (invested via an intermediary — bank, broker, distributor, or advisor). The Regular Plan has a higher expense ratio than the Direct Plan because it includes a trail commission paid to the distributor. This commission is typically 0.5% to 1.5% per year of the amount invested and is automatically deducted from the fund's assets — reducing the NAV growth rate compared to Direct Plan.
When you invest in a mutual fund through your bank, an app like PayTM Money (in distributor mode), or a financial advisor, you're typically in the Regular Plan. The fund house pays your distributor a small annual percentage for as long as your money is invested. This cost is invisible — it quietly reduces your returns each year. Over 20 years, the compounding of this small annual difference can mean 20–30% less final corpus compared to Direct Plan.
You invest via a SEBI-registered distributor or mutual fund advisor (MFA).
The AMC pays the distributor an upfront commission (sometimes) and an ongoing trail commission (annually, as a % of AUM).
This commission is built into the Regular Plan's higher expense ratio — you never pay it separately.
Because total costs are higher, the Regular Plan's NAV grows slightly slower than the Direct Plan's NAV over time.
The difference compounds over years — making it significant for long-term investors.
Same equity fund — Direct Plan expense ratio: 0.5%, Regular Plan: 1.2%. On ₹10 lakh invested for 20 years at 12% gross return: Direct Plan grows to ≈ ₹98 lakh. Regular Plan grows to ≈ ₹82 lakh. The 0.7% annual cost difference costs ₹16 lakh over 20 years due to compounding.