SEBI has introduced an important initiative to promote the mutual fund industry. Under this proposal, investors will be able to start an SIP with a minimum amount of Rs 250. This initiative is designed for individuals who are either considering investing in mutual funds for the first time or want to start investing with a small amount. SEBI believes this step will expand the reach of the mutual fund market and inspire more people to invest.
Let’s explore what this initiative is all about and what it means for investors.
Why Was This Necessary?
According to AMFI, in FY 2016-17, the contribution of SIPs to the mutual fund industry was just Rs 43,921 crore, which increased to Rs 2,11,027 crore by FY 2024-25 (as of December).
Additionally, in May 2014, the mutual fund industry’s assets under management (AUM) crossed Rs 10 lakh crore for the first time. Over time, the industry has grown rapidly, reaching Rs 66.93 lakh crore by 31st December 2024. This growth reflects the increasing trust of Indian investors in mutual funds.
In less than four years, investors’ SIP contributions have more than doubled.
SEBI believes that allowing SIPs to be started with as little as Rs 250 will benefit investors in lower-income brackets or those planning to invest for the first time.
Key Features of SEBI’s Proposal
On 22nd January 2025, SEBI issued a consultation paper which states that investors can now start SIPs with a minimum of Rs 250 per month. However, this facility will be limited to a maximum of three asset management companies (AMCs). Currently, some mutual fund companies offer small SIP amounts, but once SEBI’s proposal is implemented, this facility will be available across the industry.
This new SIP option will be available only under the growth option and will be available for equity and hybrid funds. However, it will not be available for debt funds, small-cap, mid-cap, sectoral, or thematic funds. Payment for the SIP will only be accepted via NACH (National Automated Clearing House) and UPI AutoPay, ensuring the investment process is both easy and secure.
Simplified KYC Process for New Investors
To attract new investors, SEBI has simplified the KYC process. According to the proposal, investors with a total investment of up to Rs 50,000 will not be required to provide a PAN card. Instead, they will be issued a PAN-exempt KYC reference number (PEKRN) through Aadhaar, enabling them to invest without additional documentation.
Additionally, SEBI has directed AMCs to cover the KYC fee for investors from their investor education funds, making this process more accessible to smaller investors.
Incentives for Distributors and Platforms
To popularize small SIPs, SEBI has also planned to incentivise distributors and execution-only platforms (EOPs). If a distributor enrolls a new investor in this plan and the investor continues the SIP for at least 24 months, the distributor will receive an incentive of Rs 500. This incentive will apply only to the first SIP, and the funds will come from the investor education and awareness fund.
What’s Next?
According to SEBI, this Rs 250 SIP proposal will primarily be for monthly investments, but a bi-weekly investment option may be added in the future to reduce transaction costs and the break-even time for asset management companies (AMCs).
The consultation paper also recommends that investors commit to continuing their SIP for a period of 5 years i.e, 60 installments. However, there will be no restrictions on investors withdrawing or halting their SIP before the designated time. Investors can submit their feedback on the proposal to SEBI by 6th February 2025.
*This article is for informational purposes only. This is not investment advice.
*Disclaimer: Teji Mandi Disclaimer
