Final-regulations follow-up to our September board-approval explainer. The notified framework takes effect on 1 April 2027.
SEBI has created a lower-ticket portfolio-management route called
PRIM. Its ₹25 lakh minimum may make it sound like regular Portfolio
Management Services (PMS) at half the usual entry amount. It is not.
PRIM stands for Portfolio Management Service Route for
Investment in Mutual Fund units. Under the final SEBI
(Portfolio Managers) Regulations, 2026, a PRIM manager may invest
only in direct plans of mutual funds in India, including index funds,
exchange-traded funds (ETFs) and Specialised Investment Funds
(SIFs).
The regulations were notified on 7 October 2026,
posted by SEBI on 12 October 2026, and take effect on
1 April 2027. They replace the 2020 portfolio-manager
regulations from that date.
For households considering the service, the right comparison is
therefore not merely “₹25 lakh versus ₹50 lakh.” It is: what
work will the manager perform, what can the mandate own, and what will
that work cost after every layer of fees?
The two routes have
different jobs
Regular PMS retains a minimum investment of ₹50 lakh per
client, subject to the accredited-investor exception in the
regulations. Its investible universe can include IPOs, primary-market
debt, listed or traded securities, money-market instruments and mutual
funds. Foreign securities, unlisted securities and exchange-traded
derivatives are possible only under the limits and conditions SEBI
specifies.
PRIM has a ₹25 lakh minimum and a much narrower
mandate. It can hold only direct plans of Indian mutual funds, including
index funds, ETFs and SIFs.
That means a PRIM manager is not directly choosing your individual
stocks or bonds. The manager is choosing the funds, setting their
weights, monitoring them and changing the allocation under the agreed
investment approach. The underlying mutual-fund managers still choose
the securities inside their schemes.
An existing registered portfolio manager may offer PRIM through a
segregated investment approach. An entity that wants to offer only PRIM
can seek a separate registration; the final regulations require such an
operator to maintain at least ₹2 crore of net worth,
with at least 10% of that minimum kept in specified unencumbered liquid
assets.
“Direct plan” does not mean
“no cost”
The direct-plan requirement is useful. A direct and regular plan of
the same mutual-fund scheme have the same portfolio, but the direct plan
excludes distributor commission and therefore has a lower expense ratio,
as AMFI
explains.
But PRIM adds a service above those funds. A client can therefore
bear:
- the expense ratios of the underlying direct mutual-fund plans;
- the PRIM manager’s agreed fee;
- taxes and transaction-related costs where applicable; and
- possible scheme-level exit loads and tax consequences when funds are
switched or redeemed.
SEBI’s 24
September 2026 board decision announced a maximum fixed management
fee of 1% of client assets for PRIM and also permitted a
performance-based model. The final regulations give SEBI power to
specify additional PRIM conditions, including fees. Before signing after
the regime starts, read the provider’s final disclosure document and
client agreement rather than relying only on launch-day summaries.
The important number is the total rupee cost, not
just the headline percentage.
For example, suppose a ₹25 lakh PRIM portfolio is quoted a fixed fee
of 0.75% a year. That is ₹18,750 before tax, in addition to expenses
already deducted inside the underlying funds. This does not
automatically make the service poor value. It tells you the minimum
improvement in portfolio design, monitoring, behaviour and
administration that you should expect the manager to earn through its
work.
Seven questions to ask
before you sign
1. What problem is the
manager solving?
Ask for a plain-language description. Is the service selecting funds,
setting asset allocation, rebalancing, managing cash flows, reducing
duplication, controlling risk, or all of these? “Professional
management” is not a measurable deliverable by itself.
2. What is the investment
approach?
Request the proposed allocation ranges, eligible fund categories,
rebalancing method, benchmark and decision rules. A portfolio of funds
can still be concentrated, overlap heavily or drift from your goal.
3. What is the all-in
annual cost in rupees?
Ask the provider to show the PRIM fee, tax on that fee, estimated
weighted expense ratio of the underlying funds, brokerage or other
charges if relevant, and the treatment of exit loads. Have this
illustrated for your actual investment amount.
4. How does a performance fee
work?
If a performance-linked fee is offered, identify the benchmark,
hurdle rate, high-water mark, crystallisation frequency and treatment of
deposits and withdrawals. A percentage is meaningless without the
calculation method.
5. How will fund switches
be controlled?
Frequent switching can create exit loads, taxes and time out of the
market. Ask what triggers a change, who approves it, how turnover is
reported and whether the manager estimates the cost before acting.
6. Are related fund houses
used?
Ask for the policy on schemes from affiliated, group or associate
asset-management companies. Also ask how conflicts are identified,
disclosed and monitored.
7. What do you receive
after investing?
Confirm reporting frequency, portfolio-level return calculation,
benchmark comparison, consolidated cost reporting, grievance process and
exit procedure. The 2026 regulations require portfolio managers to
segregate client holdings and address grievances within 21 calendar
days, but the agreement should make the operating process clear.
Who might find PRIM useful?
PRIM may suit an investor who has at least ₹25 lakh available for
this mandate, wants a professionally managed portfolio of funds,
understands the additional fee, and prefers delegated allocation and
rebalancing to doing those tasks personally.
It may be unnecessary for someone who can maintain a simple
diversified direct-fund portfolio, rebalance it periodically and stay
disciplined without ongoing manager oversight. An investor who needs a
one-time financial plan rather than continuing portfolio management
should compare PRIM with a fee-based registered investment adviser as
well.
Regular PMS may be the relevant comparison only when the investor
actually wants a broader securities mandate and can meet its higher
minimum. The two services should not be compared on ticket size
alone.
What to do before 1 April
2027
There is no need to rush into a product that is not yet effective.
Use the period before implementation to:
- write down the task you want to outsource;
- compare the proposed mandate with a simple direct-fund
alternative; - demand an all-in cost illustration in rupees;
- inspect the final disclosure document, agreement and applicable SEBI
circulars; and - check the manager’s registration and grievance route before
transferring money.
The ₹25 lakh threshold widens access to portfolio management, but it
does not settle whether the service is worth paying for. The decision
should rest on the mandate, process, conflicts, costs and after-cost
outcome—not on the label “PMS.”
This article is for education and does not constitute
personalised investment, tax or legal advice. Product terms and
operational conditions may be supplemented by SEBI circulars before and
after the regulations take effect.
Primary sources
- SEBI
(Portfolio Managers) Regulations, 2026 — notification dated 7
October 2026; posted 12 October 2026; effective 1 April 2027. - Key
decisions taken at SEBI’s board meeting — published 24 September
2026. - AMFI:
Direct Plan and AMFI:
Expense Ratio — investor-education references accessed 13 October
2026.