Indian market regulator SEBI has taken a step towards introducing small ticket SIP (Systematic Investment Plan) of ₹250 with an aim to make mutual fund investments more inclusive. Under this initiative, SEBI has issued a consultation paper on January 22 seeking comments from the public and experts on this new proposal.
What is SEBI’s Small Ticket SIP Plan?
- This plan is designed to attract small investors towards mutual funds with ₹250 per SIP.
- Limited to three plans: SEBI has proposed that small SIPs of ₹250 will be limited to a maximum of three plans.
- Discount rates will be offered on these three SIPs, which will help asset management companies (AMCs) achieve early breakeven on these investment schemes.
Discount rate and funding model
Mutual fund industry experts have agreed that the discount rate will be applied for the first three small SIPs.
- Break Even Time: This step has been taken to help asset management companies recover the costs incurred on these small investments.
- Funding Source: SEBI has proposed that some of the costs associated with these investments will be covered from the Investor Education and Awareness Fund.
- Additionally, asset management companies can offer SIP plans beyond three smaller SIPs, but the discount rate will be applicable only on the first three SIPs.
Objective of Financial Inclusion
SEBI Chairperson Madhabi Puri Buch had earlier mentioned the scheme and said that its aim is to promote financial inclusion.
- This initiative is being taken to connect small investors with mutual fund schemes and invest their savings in the right direction.
- This step will encourage small investments in mutual funds and help in taking financial schemes to the general public.
Limited features for small SIPs
As per SEBI’s proposal, the following services for small SIPs (₹250 per SIP) will be limited to the first three SIPs only:
- Offered by stock exchanges.
- Depositories, RTAs (Registrar and Transfer Agents).
- KRAs (KYC Registration Agencies).
This facility will not be applicable on SIP plans beyond these.
Purpose of the new format
Main objectives of this short format:
- Incorporating small savings into mutual funds.
- To encourage common people towards mutual fund investment.
- Promoting financial inclusion.
Importance of SEBI initiative
- This scheme is extremely beneficial for those who want to start investing in mutual funds on a small scale.
- Asset management companies will benefit from discount rates and limited cost strategies.
- In the long run, the scheme will make the mutual fund industry more inclusive and empowered.
