India’s smaller cities are fast catching up with the major centres in mutual fund distribution. The gap in mutual fund distributors (MFDs) between India’s top 30 cities (T30) and those beyond the top 30 (B30) is shrinking rapidly, driven by significantly faster distributor growth in smaller locations. However, the overall gap in assets under management (AUM) remains wide.
As of March 2026, B30 towns had about 18,000 fewer MFDs than T30 cities, according to a study by Crisil Intelligence and the Association of Mutual Funds in India (Amfi)—down from a gap of nearly 43,000 five years ago.
This momentum is reflected in overall asset expansion as well. Between March 2021 and March 2026, mutual fund AUM in B30 towns expanded 2.6 times to ₹13.9 trillion, while assets in T30 cities grew 2.2 times to ₹59.8 trillion over the same period.
This means B30 AUM still accounts for only about 18% of total industry AUM despite the faster distributor growth, noted Manish Jain, CEO at Choice AMC. “If MFD count reaches parity while assets remain concentrated in T30, an expanding pool of distributors in small towns will be chasing a comparatively small pool of business,” Jain added.
Manish Kothari, CEO of ZFunds, said that this pattern extends beyond distributors to customer numbers and SIP flows, where B30 is growing faster than T30 in both SIP contributions and retail AUM. As of March 2026, B30 locations accounted for 54 million active SIPs, overtaking T30 cities, which stood at 44.5 million, according to Sebi data.
Over the past five years, T30’s share in total SIP volume dropped 8 percentage points to 44.6% in FY26. This decline was offset by B30 cities, whose share in the total number of SIPs rose 7.1 percentage points to 54% in the same period.
Lower entry barriers
Distributors are growing at a faster pace because entry barriers have fallen. In recent years, several platform-based MFDs have emerged to provide the necessary technology and infrastructure for smaller distributors. As a result, new distributors no longer need to build their own websites, investment platforms, or back-end infrastructure; instead, they can leverage the established frameworks offered by these platform-based providers.
Take Prudent Corporate Advisory, the second-largest platform-based MFD by assets and the only listed distributor in this space. According to its investor presentation, the number of MFDs operating under its platform expanded at a compound annual growth rate (CAGR) of 17% to reach 36,880 as of FY26.
“A cluster of competing MFD-enablement tech platforms emerged to remove the need for an office backend or support staff to run a distribution practice, making setting up easier for MFDs,” said Jain of Choice AMC.
Commission structures for B30 cities were also made more attractive in 2025. The original B30 incentive, which offered up to 30 basis points of additional expense ratio on B30 assets, was suspended by Sebi in 2023 following evidence of misuse, such as transaction splitting and investment churning.
Sebi subsequently introduced a replacement framework, formalized in a November 2025 circular. Under this new structure, distributors are eligible for a 1% commission on an investor's first application, capped at ₹2,000 for lump-sum investments (provided the investor remains invested for at least one year), as well as a 1% commission on systematic investment plans (SIPs), subject to the same cap.
Additionally, increased digitization and a broader network of exam centers for the distributor test have made it far easier to qualify as an MFD. “An aspiring distributor can now complete training and examinations, register for an ARN (Amfi registration number) digitally and get empanelled with AMCs (asset management companies) online. KYC, transactions and portfolio reporting can also be handled digitally,” said Ritesh Seth, founder of My Fund Guide, a mutual fund distribution platform.
Professional skills gap
While the number of MFDs in smaller cities is rising rapidly, a gap remains in their professional training and development. An AMC official, speaking on condition of anonymity, noted that distributors in smaller towns require guidance beyond investment products, specifically in communication and personal presentation.
“An MFD may have good knowledge of investments, but if he does not know how to communicate well or present himself professionally, he can lose the client to a bank relationship manager in smaller cities who is better trained and better presented,” the official said.
“In T30 cities, distributors face greater competition and investors have more options. This pushes them to improve their products, services and communication,” said Seth of My Fund Guide.
“Competition is still thinner in smaller cities. As a result, some distributors may rely on generic advice, such as recommending funds based on recent returns, rather than offering broader financial planning,” he added.