7.3 Modes of Distribution

Physical Distribution

The traditional route. The investor completes an application form accompanied by the Key Information Memorandum and submits it with payment at an Official Point of Acceptance (OPA) — an AMC branch, an RTA service centre or a designated collection centre.

The defining feature is time stamping. The application is stamped on receipt at the OPA, and that stamp, combined with realisation of funds, determines which day's NAV applies. Physical distribution remains significant for first-time investors, for non-individual investors with resolution and signatory requirements, and in locations where digital adoption is limited.

Direct Digital Channels

AMC websites, AMC mobile applications and RTA platforms allow investors to transact directly.

• Transactions placed through these channels under a direct plan carry no distribution commission, which is what makes the direct plan's expense ratio lower.
• Investors can also transact online through a distributor's ARN code in a regular plan, so "online" and "direct" are not synonyms. This distinction is examined: the plan type, not the medium, determines whether commission is embedded.

Stock Exchange Platforms

SEBI permits mutual fund transactions through stock exchange infrastructure:

• BSE StAR MF
• NSE MFSS

Brokers and eligible distributors place purchase and redemption orders on these platforms. Advantages include settlement through familiar exchange infrastructure, holdings alongside other securities in a demat account, and consolidated reporting. This route is natural for investors who already hold a demat and trading account.

MF Utility

MF Utility is a shared transaction platform created by the industry. An investor obtains a Common Account Number (CAN) and can then transact across schemes of all participating AMCs through a single interface, with one form and one payment instruction covering multiple schemes.

The practical benefit is for investors holding across several fund houses, who would otherwise deal with each AMC and RTA separately.

Holding Form: Statement or Demat

Units may be held in either of two forms:

Investors may convert between the forms. Dematerialised holding is mandatory for units transacted on exchange platforms and for ETFs, which are traded like shares.

Other Routes

• Systematic transaction mandates — SIPs registered through NACH mandates, which then execute automatically without a fresh instruction each month.
• Call centres — AMC and RTA telephone channels for specified transactions.
• Messaging and app-based channels — where AMCs permit transactions through chat interfaces or unified payments infrastructure, subject to the same cut-off and realisation rules.

Choosing a Mode

The Rules That Do Not Change

Whichever mode is used, three things are constant and are the examinable core:

1. Cut-off timing and time stamping determine applicable NAV.
2. Realisation of funds governs NAV applicability for purchases, other than in liquid and overnight schemes where a specific rule applies.
3. KYC compliance is a precondition for any transaction, irrespective of route.

The mode changes convenience and cost. It does not change the rules on pricing, and a distributor who suggests that an exchange route or an online route secures a better NAV is simply wrong.

Official Points of Acceptance

The concept of the Official Point of Acceptance deserves separate attention because it anchors the pricing rules. An OPA is a location or electronic facility that the AMC has formally designated, and disclosed in the scheme documents, as authorised to receive investor transactions.

• A transaction is treated as received by the mutual fund only when it reaches an OPA, not when it reaches the distributor.
• The time stamp applied at the OPA is the evidence of receipt, and time stamping machines and electronic logs are subject to audit.
• Handing an application to a distributor at 2 p.m. does not secure that day's NAV if the distributor submits it to an OPA the following morning.

That last point is the source of a recurring investor grievance, and a distributor who promises "today's NAV" while intending to submit tomorrow has made a representation they cannot keep. The safe practice is to submit on the same day and to tell the investor that applicable NAV depends on receipt at the OPA and, for purchases, on realisation of funds.

Comparing the Routes on What Matters

The column that surprises candidates is the second: commission depends entirely on whether a distributor code is attached, and every route above supports both possibilities except the direct plan route itself.