India's market regulator has proposed that fund houses launch sachet-sized investment plans, offering small investors a way into the financial markets.
In a consultation paper released on Wednesday, the Securities and Exchange Board of India (SEBI) asked fund houses to launch systematic investment plans (SIPs) starting at 250 rupees or around $3 with lower costs and easier customer identification processes.
The objective, SEBI said, is to "promote financial inclusion, inculcate the habit of systematic saving and facilitate investment of small savings by investors new to the Mutual Fund space."
About 225 million investors currently invest through SIPs but a majority are from big cities.
Industry participants have agreed to offer discounted rates for verifying customers, clearing and settling such investments, SEBI said, adding that some expenses will be compensated for via investor education funds maintained by the industry.
Such schemes, while technically permitted, are not seen as commercially viable, prompting the industry to seek special dispensation from the regulators, Reuters reported last week.
"While the number of investors participating in mutual funds have grown steadily over the years, there is a considerable opportunity for increasing the reach of the mutual funds to all sections of the society, to enable every individual to have access to this financial product," SEBI said.
Assets under management in India's fund industry rose to 68 trillion rupees as of November 2024 from 10 trillion rupees in 2014, with the number of unique investors currently estimated at 51.8 million.
Each investor would be allowed to make only three sachet-sized investment at discounted costs. Such investments can only be made via the national automated clearing house and India's unified payment interface, commonly used for retail transactions.
A small incentive may be offered to distributors to popularise these investment schemes, SEBI said.
The regulator has sought industry comments by Feb.6, following which it will announce final rules.
