SBI set to launch micro-mutual fund scheme

In a move to tap opportunities in the bottom of the pyramid market, SBI Mutual Fund is set to make the minimum investment requirement in mutual funds smaller.

As part of its financial inclusion agenda, SBI MF is planning to lower the bar for investment through systematic investment plans (SIPs) to Rs 50 from the present level of Rs 100.

The Raghuram Rajan committee on financial sector reforms, which dealt with the issue of financial inclusion in detail, had suggested that the bar could be lowered to Rs 200 to get more people to invest in equities and also widen the investor base.

SBI Chairman O P Bhatt, who was part of the Rajan panel, said, "We are already into micro-insurance in a big way and we are now looking at micro-mutual funds. I have spoken to executives in SBI Mutual Fund and we will soon have schemes where people can invest with just Rs 50."

Bhatt said the final product design for the micro mutual funds will be decided in consultation with Societe General, its joint venture partner in SBI MF.

Simultaneously, SBI Life, the insurance venture, is also designing a micro health insurance scheme and had started with Devi Shetty of Narayana Hrudayalaya.

At present, Reliance Mutual Fund has an SIP that provides an option to invest Rs 100 a month. Similarly, UTI SIP starts with a minimum investment of Rs 500, while ICICI Prudential requires an investment of at least Rs 1,000.

Through SIPs, individuals can choose to stagger investment at regular intervals instead of investing a large amount at one time.

While the data for the number of individuals who were investing Rs 100 a month was unavailable, a distributor said not many people were aware of such schemes.

Mutual fund industry sources pointed out that high management cost was one of the reasons for staying away from schemes, which stipulated low minimum investment. But SBI could overcome a part of the problem given its reach through 10,000 branches, a large number of which are in rural areas.

Besides, the Rajan committee pointed out that there could be self-help groups that might invest Rs 200 a month (say, with 10 women chipping in with Rs 20 each) and the mutual fund industry will recognize SHGs are legitimate participants.

The rule regarding a permanent account number for these investors also needs to be revisited, the report said.