Launch of Rs.250 SIPs: SEBI makes Mutual Fund SIPs more affordable

The Securities and Exchange Board of India (SEBI) proposed allowing small monthly SIPs (Systematic Investment Plans) with a minimum investment of Rs.250. However, investors will be allowed to start only up to three such SIPs.

SEBI as a market regulator released a consultation paper, together with the mutual fund industry, plans to make mutual fund products available in smaller and more affordable sizes.

SEBI has suggested limiting investors to one minimum investment SIP per Asset Management Company (AMC), with a maximum of three AMCs. However, AMCs can still provide Rs.250 per month SIPs beyond the first three small ticket SIPs. But, the discounted rates from intermediaries will only apply to the first three Rs.250 SIPs.

The consultation paper said, “The proposed small ticket SIP of Rs.250, which is part of the schematized mutual fund product, gives the entire industry a chance to contribute to the cause of financial inclusion.” At present, some Asset Management Companies (AMCs) are providing SIPs with smaller ticket sizes under certain schemes.

The consultation paper mentioned that industry participants in the mutual fund sector have agreed to give discounted rates to help AMCs recover their costs more quickly for these investments.

Advantages of Small Ticket SIP Plan

Investors can start up to three small-ticket SIPs (one in each of up to three different AMCs). While AMCs can still allow SIPs of Rs.250 or more beyond these three, the discounted rates provided by intermediaries will only apply to the first three SIPs.

Small-ticket SIPs can be provided under the growth option of the plan.

The payment method for small-ticket SIPs will be limited to National Automated Clearing House (NACH) and UPI auto-pay modes only.

The small ticket SIP can be made in the Statement of Account (SOA) mode or demat mode of investment.

The KYC cost for small-ticket SIPs can be covered by the funds collected by AMCs through a 1 bps charge on mutual fund schemes, allocated for investor education and awareness.

Distributors will earn a marginal commission. To encourage them and Employee Outreach Partners (EOPs) to promote this initiative, a Rs.500 incentive may be offered to educate new investors in the mutual fund industry.

SEBI has invited public feedback on these proposals, with the submission deadline set for February 6.