The Mutual fund in which an investor directly invests in a particular mutual fund without any involvement of a distributor or agent is known as Direct Mutual fund. Direct mutual fund is not ideally a fund name or fund type, it's a way, how the investment is done. In general an investor can start SIP or Lump sum purchase of a mutual fund scheme by logging in to his trading account or DMAT account provided by a authorised broker. However, as there is involvement of broker in buying or selling mutual fund some fee is levied as a part of processing and brokerage charges which investor has to pay at the time of purchase or withdrawal. This is extra burden on the investor, so to overcome these charges and involvement of broker SEBI (Security Exchange Board of India) or The governing authority on top of the Mutual Fund came up with "Direct Plan".
"Direct Plan" is a plan in which an investor can directly transact and manage the mutual fund by creating an account with Mutual Fund provider company and no extra fee is charged against any of these transactions. In order to do so investor must be a KYC (Know your customer) verified entity. In India, PAN (Permanent Account Number) is used to do the KYC formalities and all the direct/indirect investments are linked to his PAN. There is no need to do KYC every time for different mutual fund companies if investor PAN is already verified or KYC registered.
Let us discuss further with real time example. An investor wants to invest in Axis Long Term Equity fund Direct Plan (Growth). Investor does not have any account with any of the Broker firm nor have DMAT account. In this case an investor can directly go to Axis Mutual Fund website and register himself with his details and PAN for account. As investor's PAN or Permanent Account Number is not yet KYC verified, he has to submit the list of documents for verification purpose to the Axis authorities which can be done online by uploading or submitting it offline. Once the KYC is verified, investor has to link his account with Axis Account for transaction purpose and by doing so investor can fully manage the mutual funds schemes listed under Axis Mutual Fund Asset Management company.
Now consider another example, same investor wants to invest in Aditya Birla Capital (AMC) mutual funds. As, investor PAN is already KYC verified, he only needs to create an account with Aditya Birla Capital(AMC) and provide necessary details. There no need to do KYC verification once again as PAN is already verified. Investor now can easily invest in any of the scheme under Aditya Birla Asset Management Company.