No mutual fund schemes will have an entry load from August one, a move which will reduce the cost for investors looking to invest in these products.
Entry load refers to the charge levied by a mutual fund when an investor steps in, to meet their marketing costs and distribution commissions.
"There shall be no entry load for all mutual fund schemes," market regulator SEBI said in a circular.
The SEBI board had given nod to this proposal on June 18.
The decision will apply to additional purchases in existing mutual fund schemes and switch over to other schemes as well as new schemes from August one 2009.
This will also apply to systematic investment plans registered on or after August one.
SEBI also directed MF companies to carry a suitable disclosures in application forms that the upfront commission will be paid by investors directly to the distributors.
SEBI also said of the exit load paid by the investors, a maximum of 1 per cent will be maintained in a separate account to pay commission to the distributors by mutual fund companies.
The market regulator directed distributors to disclose all commissions payable to them for different competing schemes of various mutual funds.