SEBI floats consultation paper on ‘sachetisation’ of mutual funds; seeks public comment

To increase the reach and facilitate participation from low-income groups in mutual funds, regulator SEBI on Wednesday (January 22, 2025) floated a consultation paper on ‘sachetisation’ of mutual funds.

In its consultation paper, SEBI has proposed a sachetised mutual fund product – small ticket systematic investment plan (SIP) of ₹250. Further, small ticket SIPs can be offered in any scheme except for debt schemes, sectoral and thematic schemes, small-cap and mid-cap schemes under equity schemes category.

Presently, while some Asset Management Companies (AMC) do offer SIP with small ticket size under some of their schemes.

“Sachetisation of mutual funds will enable small ticket investment in mutual funds gradually on a periodic basis. This can assist in financial empowerment of the under-served section of the economy and nudge fund houses to expand their footprints to even remote locations in the country,” SEBI said.

Elaborating on the proposal, SEBI said that the small ticket SIP – ₹250 SIP – that an investor can start may be restricted to three SIPs (one each in upto 3 Asset Management Companies). AMCs can continue to offer ₹250 SIPs beyond three small ticket SIPs but the discounted rates offered by intermediaries are restricted to only the first three ₹250 SIP.

SEBI has suggested that the mode of payment/investment for small ticket SIP should be restricted to National Automated Clearing House (NACH) and Unified Payment Interface (UPI) autopay mode only.

The Know Your Customer (KYC) cost incurred by the scheme for small ticket SIP may be compensated from the fund collected by AMCs by charging 1 bps to mutual fund schemes for investor education and awareness.

The regulator SEBI said that an incentive of ₹500 should be provided to distributor/Execution Only Platforms (EOPs) for small ticket SIP. The incentive should be over and above the distribution commission payable by AMC to the distributor.

The regulator expected that the financial inclusion facilitated under this scheme would break-even for the AMCs within 2 years.

Since 2014, the Asset under Management (AUM) of the industry has grown from ₹10 lakh crore to over ₹68 lakh crore as of November 2024 and the total number of unique investors of mutual funds has grown from 1.7 crores to 5.18 crore during the period.

While the number of investors participating in mutual funds has grown steadily over the years, SEBI felt a considerable opportunity for increasing the reach of the product to all sections of the society, to enable every individual to have access to this financial product and accordingly came out with the proposal.

The Securities and Exchange Board of India (SEBI) has sought public comments on the proposals till February 6.