The Securities and Exchange Board of India (Sebi) has proposed bit-sized systematic investment plans (SIP) of Rs 250 in a step to increase the mutual fund footprint in the underserved section of the country.
While several asset management companies (AMCs) already offer small size SIPs, the market regulator is of the opinion that the “sachetisation” of SIPs will help the entire industry to participate in financial inclusion.
The market regulator has proposed measures to address the cost aspect of smaller SIPs in a consultation paper floated on Wednesday.
With each SIP or lumpsum investment, there are several charges involved for the AMC to other intermediaries such as KYC Registration agencies, stock exchanges, and clearing corporations.
Under the proposal, Sebi said that the AMCs will be able to utilise the Investor Education and Awareness Fund to reach break-even in case of smaller SIPs.
Also Read
Further, the intermediaries will be charging lower rates for such SIPs.
“The industry participants involved in the Mutual Fund space have agreed to offer discounted rates to enable faster break-even for AMCs on cost incurred towards these investments,” said Sebi.
The market regulator expects that AMCs would be able to reach break-even for such SIPs within two years with the help of subsidised charges and reimbursement of certain costs from the investor education and awareness fund.
However, an investor might only be able to do a Rs 250 SIP in a maximum of three SIPs, spread across three AMCs.
Further, to encourage distributors to promote such small size SIPs, Sebi may allow an incentive of Rs 500 for “educating an investor” new to the mutual fund industry.
The regulator has sought comments on the proposals by February 6.