To improve market accessibility and financial inclusion in mutual funds, the Securities and Exchange Board of India (Sebi) is considering bringing down the minimum amount of systematic investment plans (SIPs) to Rs 250.
Sebi chairperson Madhabi Puri Buch hinted that that the minimum amount of SIPs might be brought down to Rs 250. He said that the feasibility of investments at Rs 250 per month will be improved, as currently the mutual fund industry feels investments of Rs 500 per month is only feasible.
“We are working with them (the mutual fund industry) to see where is the cost, and what can Sebi do to facilitate to make it possible to bring that viability down to Rs 250 a month, because then it is the equivalent of what Hindustan Lever did with shampoo sachets. You just explode the market,” Buch said at an event organised by Business Today.
Buch expressed optimism that the capital market in India could get a massive push through smaller range SIPs, and the ‘sachetisiation’ of the market’ will help in financial inclusion.
This strategic move by Sebi comes at a time when the mutual fund industry is experiencing a rise in SIP investments.
One of the major attractions of SIP lies in ‘rupee-cost averaging’, which allows the investor to mitigate market volatility by averaging out the purchase cost of units. Missing an SIP instalment will not lead to penalties, but consecutive non-payment for three months will lead to automatic cancellation of the SIP.
Starting an SIP involves entering necessary information using your know-your-customer (KYC) documents on the mutual fund scheme’s website where one can select one’s preferred scheme. The investor has to first complete the eKYC, then do an online registration by entering the bank and mutual fund scheme details. After this, the investor will receive a unique registration number. The investor has to enter this number to complete the bank authorisations to allow for deducting the SIP sums from his/her bank account towards mutual fund investments through SIPs.
