What It Means
A direct plan is a mutual fund scheme bought straight from the asset management company (AMC), with no distributor or broker involved. A regular plan is the same underlying scheme, bought through an intermediary such as a broker, bank, or agent, whose commission is baked into the plan's costs rather than billed separately.
How It Works
Both plans invest in the exact same portfolio and are managed by the exact same fund manager; only the expense ratio differs, since the regular plan's expense ratio includes the distributor's trail commission and the direct plan's doesn't. That gap, typically somewhere around 0.5 to 1 percentage point depending on the fund, means the direct plan's NAV ends up slightly higher than the regular plan's over time, even though both started from the same NAV at launch.
Example
₹5,00,000 invested for 15 years at a 12% return in a direct plan (say a 1% expense ratio) versus the same amount at an effectively 11% return in the regular plan (roughly 2% expense ratio) can end up differing by well over ₹5 lakh, purely from that expense ratio gap compounding over time.
Warning
A common mistake is assuming a regular plan gives "better service" that justifies the extra cost. The fund manager, portfolio, and strategy are identical; the only real difference is who gets paid, and how much of your return it costs you.