How to Become a Mutual Fund Distributor in India: Roles, Steps, and the Importance of a Current Account

Posted on Tuesday, September 23rd, 2025 | By IndusInd Bank

If you’ve ever thought about turning your interest in finance into a business, becoming a mutual fund distributor (MFD) could be your entry point. It’s a profession where you act as the bridge between investors and mutual funds, helping people access financial products while building a business of your own.

The numbers suggest this is no niche pursuit. As of March 2025, the mutual fund industry’s Assets Under Management (AUM) in India stood at ₹65.74 lakh crore, up about 23.1% year-on-year from March 2024. Also, in 2025, 30,000 new individual distributors joined the mutual fund distribution business in India. 

These figures tell you two things: the opportunity is real, and competition is rising. But like any business, distribution requires not just knowledge of the product but also the right licenses, compliance measures, and financial tools to run operations smoothly. One of those tools is Current Account, which plays a bigger role than many new distributors realise, especially when it comes to managing GST-related transactions and keeping business finances organised.

Who is a Mutual Fund Distributor?

A mutual fund distributor is a professional who helps investors buy mutual funds. Think of them as facilitators: they connect people who want to invest with fund houses that offer schemes. Distributors don’t manage money directly; instead, they focus on spreading awareness, explaining processes, and ensuring smooth transactions between investors and asset management companies (AMCs).

They may be individual ARN holders, employees of larger distributors, or work through institutional setups. Some MFDs operate purely in a digital/distribution-network mode, others do more person-to-person handholding.

Role & Responsibilities of a Mutual Fund Distributor

The work of an MFD goes far beyond simply selling. Their responsibilities include:

• Explaining mutual fund products to clients in simple, clear, and compliant terms.
• Assisting with account opening, completing KYC formalities, and helping investors understand documentation.
• Ensuring regulatory compliance while onboarding investors (SEBI, AMFI, KYC, etc.).
• Handling service requests like redemptions, switches, account updates.
• Educating clients about disciplined investing: periodic review, SIPs, risk diversification.
• Staying updated with product features, expense ratios, performance, etc., to guide clients professionally.

Advantages of Becoming a Mutual Fund Distributor

Why consider this career path? Some key benefits include:

• Scalable business model: You can start individually, in one city; grow via referrals, digital tools, or even a team.
• Recurring income: Trail commissions (ongoing commissions linked to AUM) help create a steady income stream.
• Low capital investment: Compared to many businesses, infrastructure costs are modest. A good computer, internet, compliance tools, and access to AMCs / platforms is often enough.
• Flexibility: You set your hours, your region. Many MFDs serve in part-time capacities initially, scaling later.
• Growing market: Retail participation in mutual funds is increasing; SIP inflows are strong. For example, the number of SIP folios and contributions have shown consistent growth.

Challenges Faced by Mutual Fund Distributors

Of course, there are hurdles too:

• Building trust: Investors are increasingly getting savvy; they want transparency, proof, a track record. Especially in smaller towns or for new MFDs.
• Regulatory compliance: Keeping up with SEBI, AMFI, KYC, documentation, anti-money laundering, etc., is essential—and non-compliance can halt income.
• Competition: Both from other distributors, digital platforms, direct plans, fintechs. Margins can be pressured.
• Technology & administration overhead: Tools, back-office, reporting, reconciliation of commissions, etc., all need investment.
• Cash flow & delays: Commissions may have delays; payments dependent on AMCs, clearing of invoices, etc.

Eligibility Criteria for Becoming a Mutual Fund Distributor in India

You’ll need certain things in place:

• Be at least 18 years old.
• Clear the NISM Series V-A Mutual Fund Distributors Certification Examination.
• Register with AMFI to get an ARN (AMFI Registration Number).
• Fulfill KYC for self, set up identity documents.
• Register for GST if your income or turnover crosses the threshold (or as required by law).
• Have bank accounts (ideally a dedicated one for business), and tools/infrastructure for operations.

Steps to Become a Mutual Fund Distributor in India

If you’re serious about becoming a distributor, here’s a simple step-by-step guide you can follow:

Step 1. Clear the NISM Certification Exam

Start by preparing for the NISM Series V-A: Mutual Fund Distributors Certification. Use official study material and practice mock tests until you’re confident.

Step 2. Get Your ARN (AMFI Registration Number)

Once you clear the exam, apply for your ARN with the Association of Mutual Funds in India (AMFI). Keep your documents handy for a smooth approval process.

Step 3. Register Your Business

If you plan to work under a brand, partnership, or firm, complete the necessary business registration formalities.

Step 4. Apply for GST (if required)

GST registration is mandatory once your earnings cross the threshold. It also helps you issue proper GST invoices to Asset Management Companies (AMCs).

Step 5. Open a Current Account for Your Business

Having a dedicated Current Account helps you keep client payments, AMC commissions, and GST transactions organised. It’s also required for smooth compliance and day-to-day business flows.

Step 6. Empanel with AMCs or Platforms

Tie up with AMCs directly or join larger platforms/aggregators. This gives you access to mutual fund schemes, commission structures, and technology support.

Step 7. Set Up Client Onboarding Systems

Build a process for KYC, agreements, and record-keeping. Clients expect smooth, professional onboarding.

Step 8. Use Technology Tools

Invest in CRMs, e-KYC tools, digital signatures, and commission-tracking dashboards. These save you time and reduce errors.

Step 9. Market Your Services

Rely on referrals, social media, and local networks to attract clients. Remember, trust and service are your biggest selling points.

Also Read: GST for Freelancers: How Tax Compliance and a Current Account Build Credibility

How Mutual Fund Distributors Earn?

Here’s how the money flows:

• Trail commissions: Once you have clients investing, as their AUM grows (via market appreciation or additional investments), you earn ongoing trails.
• Upfront commissions: These have become less significant in many categories or are regulated but still exist in some cases.
• Scale benefits: Larger distributors with higher AUM or multiple sub-distributors get better margins / negotiating power. As per FY 2024-25, 3,150 leading distributors earned about ₹21,107 crore in commissions.

That said, many distributors’ earnings depend heavily on client retention, quality of service, and keeping clients invested over time rather than chasing new ones only.

Difference between Mutual Fund Distributors and Investment Advisors

Why does this distinction matter?

For anyone entering the field, it’s crucial to be clear about your role. As a distributor, your business revolves around compliance, commission flows, and ensuring smooth product access for clients — not giving advisory services. This is also why GST registration and a dedicated Current Account become so important. They aren’t just regulatory tick boxes; they’re enablers of professional credibility and smooth business operations.

The Role of a Current Account for Mutual Fund Distributors

A dedicated Current Account is the natural partner to GST registration. Think of it as the financial backbone of your distribution business.

• Keeps business and personal money separate: This is especially important when you’re filing GST or preparing invoices for AMCs.

• Simplifies GST compliance: All commission inflows and GST-linked outflows can be tracked neatly when routed through a single Current Account.

• Supports cash flow management: With trail commissions coming in and operational expenses going out, a Current Account gives you a clear view of your working capital.

• Adds credibility: Operating through a formal business account signals professionalism to fund houses, clients, and even regulators.

• Banking benefits: Depending on your bank, you may also get higher transaction limits, overdraft facilities, bulk payment options, and digital banking tools that make day-to-day operations easier.

For distributors, combining GST registration with a well-managed Current Account means you’re not only compliant on paper but also better equipped to run a clean, transparent, and scalable business.

How Technology is Shaping Mutual Fund Distribution

Technology has made the distributor’s job faster, smarter, and more scalable. Some key shifts are:

• Hassle-free onboarding: Online KYC, Aadhaar verification, and e-signatures mean clients don’t have to deal with endless paperwork.
• One-stop platforms: Aggregators allow investors to compare mutual funds, check performance, and even invest digitally.
• Smarter tracking: Tools help distributors monitor Assets Under Management (AUM), track commissions, and spot high-potential clients.
• Digital client servicing: From WhatsApp updates to video calls, you can now serve clients anywhere in India without being physically present.

This not only reduces costs but also helps distributors expand to smaller towns (B30 or Beyond Top 30 cities) where demand for mutual funds is rising.

Future Trends in Mutual Fund Distribution

Here’s what the next few years could look like for distributors in India:

• Hybrid models on the rise: A mix of digital tools and human advisory will become the norm.
• Tighter regulations: Expect stricter rules on transparency, commissions, and client disclosures.
• Rural and small-town growth: A growing number of new distributors are coming from B30 cities (Beyond Top 30 cities).
• More women joining the industry: By December 2024, women made up about 21.5% of all registered MFDs, and the number is rising.
• Focus on micro-investors: AMCs and regulators may design incentives to encourage SIPs and smaller-ticket investments.
• Changing market share: Non-bank distributors are steadily gaining ground in commission payouts compared to banks.

Final Thoughts

Becoming a mutual fund distributor is a real and growing opportunity in India. The numbers show the industry is scaling, more people are coming in, and retail investor participation is increasing. But that also means that to succeed, it’s not enough to be technically qualified—you need strong business discipline, compliance, and infrastructure.

A certification (NISM), an ARN, GST registration, and crucially, a well-configured Current Account for your business are foundational. They don’t ensure success by themselves, but without them, many downstream problems tend to crop up (delayed commissions, GST issues, murky accounts, loss of trust). If you’re serious about this path, invest time not only in understanding mutual funds, but in building your systems—banking, record-keeping, client service—and you’ll be better placed to grow steadily, sustainably, and credibly.