In an effort to expand the reach of mutual funds in the underserved regions of the nation, the Securities and Exchange Board of India (Sebi) has suggested bit-sized systematic investment plans (SIP) of Rs 250.
Although small SIPs are already offered by a number of asset management companies (AMCs), the market regulator believes that the "sachetization" of SIPs will enable the entire sector to take part in financial inclusion.
In a consultation paper released on Wednesday, the market regulator suggested actions to address the cost issue of smaller SIPs.
The AMC charges other intermediaries like stock exchanges, clearing corporations, and KYC registration agencies a number of fees for each lump sum or SIP investment.
Sebi stated that the proposal would allow the AMCs to use the Investor Education and Awareness Fund to break even for smaller SIPs.
Furthermore, for these SIPs, the intermediaries will charge reduced rates.
"To facilitate a quicker break-even point for AMCs on the expenses incurred for these investments, the industry players in the mutual fund space have agreed to offer discounted rates," Sebi stated.
With the aid of reduced fees and reimbursement of specific expenses from the investor education and awareness fund, the market regulator anticipates that AMCs will be able to break even for such SIPs in two years.
However, an investor may only be able to make a maximum of three SIPs, distributed among three AMCs, totaling Rs 250.
Additionally, Sebi may permit a Rs 500 incentive for "educating an investor" who is new to the mutual fund industry in order to motivate distributors to advertise such small size SIPs.
The deadline for the regulator to receive feedback on the proposals is February 6.
