Sachet SIPs yet to scratch the surface

Bite-sized mutual fund plans for first-time investors remain a speck in the retail universe despite a regulatory push, as fund houses and distributors remain cagey about the viability of the new product.

- Srushti Vaidya

In February, the market regulator flagged off ₹250 micro-systematic investment plans (SIPs) to widen India's investor base and promote financial inclusion. However, just 9,000 investors signed up for the scheme until June end, a Mint analysis of industry data showed, paling in comparison to active SIPs of 91.8 million excluding such micro investments. The reason: small ticket sizes and low distributor commissions.

"Since the ticket size is smaller, typically, the revenue per case becomes lower," said Ganesh Mohan, managing director of Bajaj Finserv Asset Management Ltd, which manages more than 25,400 crore of assets. In a low-margin business, one needs a different kind of solution, Mohan said at a recent industry event, adding his company is working with registrar and transfer agents (RTAs) to create a financial and technology model that ensures such plans are viable.

Currently, SBI Mutual Fund, UTI Mutual Fund and Kotak Mahindra AMC are among those who offer the ₹250 SIP.

An industry executive said an asset management company (AMC) spends about ₹40 to verify the address and identity of every new investor, while it earns 0.3% on the SIP annually.