Entry Load
Entry load refers to a one-time fee that mutual fund companies historically charged at the time of purchasing units. It was expressed as a percentage of the invested amount and deducted upfront, meaning fewer units were allotted.
How It Worked (Pre-2009)
Entry loads typically ranged from 1% to 2.25%. For example, investing ₹10,000 with a 2% entry load meant only ₹9,800 was used to purchase units. This load primarily compensated distributors for marketing and selling fund units.
SEBI's Abolition in 2009
SEBI issued a circular in June 2009, effective August 1, 2009, abolishing entry loads on all schemes. The rationale included:
- •Transparency: Investors were often unaware of the deduction
- •Conflict of interest: Distributors had incentive to churn portfolios for repeated loads
- •Investor protection: Reducing immediate cost drag on retail investments
Following abolition, distribution moved toward a trail commission model embedded within the expense ratio of regular plans.
Global Context
Entry loads remain prevalent in some international markets, particularly certain US mutual fund structures (Class A shares), where front-end loads can reach 5.75%. Indian regulations represent a more investor-friendly framework.
Current Position
No SEBI-registered mutual fund in India is permitted to charge an entry load. All purchases — through AMC websites, registrar platforms, or distributor channels — are free of entry load. Distribution cost is now reflected in the differential expense ratio between regular and direct plans.