SEBI has put forward a proposal to limit the concession offered by intermediaries for processing small ticket (₹250) systematic investment plans. The cap would be set at a maximum of three schemes and the processing of these SIPs would be restricted to the National Automated Clearing House and Unified Payment Interface.
In a consultation paper released on Thursday, SEBI highlighted that the mutual fund industry is considering the introduction of a sachetised product involving small ticket SIPs of ₹250. All intermediaries regulated by SEBI and infrastructure service providers to mutual funds have agreed to participate in this initiative by reducing the costs associated with processing ₹250 SIPs, with the goal of making the product economically viable and sustainable.
Mutual funds had requested a concession to implement ₹250 SIPs, as the cost of processing these SIPs was prohibitively high, making it difficult for fund houses to sustain them in the long term. Currently, the minimum SIP limit stands at around ₹500 per scheme. Some fund houses do offer ₹250 SIPs without any concession from service providers, in order to attract first-time investors.
With the discounted rates offered by intermediaries and the reimbursement of certain costs from the Investor Education and Awareness Fund, it is anticipated that the cost of small ticket SIPs for new investors in the mutual fund industry would break even within 2 years for the Asset Management Companies (AMCs).
Investors are invited to submit their feedback by February 6. The proposal suggests that the small ticket SIP of ₹250 be limited to three SIPs (one in each up to 3 Asset Management Companies). Beyond this restriction, AMCs can continue to offer ₹250 SIPs, but the discounted rates offered by intermediaries will only apply to the first three.
Additionally, the proposal states that small ticket SIPs may be offered under the Growth option of the plan, and the mode of payment/investment for these SIPs may be restricted to NACH and UPI auto pay mode only.
Furthermore, the Know Your Customer cost incurred by the scheme for small ticket SIPs may be compensated from the fund collected by AMCs by charging one basis point to mutual fund schemes for investor education and awareness.
To incentivize distributors and Execution Only Platforms to participate in educating new investors in the mutual fund industry and promoting sustainable long-term investment, an incentive of ₹500 will be extended to them. All statutory disclosures to unitholders may be made through a registered mobile number and email ID.
The consultation paper aims to shape the regulations surrounding small ticket SIPs and invites stakeholders to provide their comments on the proposed changes.
