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SEBI’s ‘Sachetisation’ Plan to Boost Financial Inclusion
Context:
SEBI is introducing a “sachetisation” plan, enabling small-ticket systematic investment plans (SIPs) starting at ₹250 per month, to make mutual fund investments accessible to underserved populations.
Mutual Fund Industry in India
- Growth in Assets Under Management (AUM)
- 2014: Rs 10 lakh crore
- November 2024: Rs 68.08 lakh crore
- Increase in Investor Base
- March 2018: 1.7 crore unique investors
- November 2024: 5.18 crore unique investors
- Challenges Highlighted by SEBI
- Limited participation from low-income groups
- Unequal accessibility of mutual fund products across societal segments
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- Popularity Among Middle-Class Investors: Mutual funds have become a preferred investment vehicle for middle-class households.
- SEBI’s Sachetisation Initiative
- Aimed at increasing financial inclusion.
- Focused on empowering underserved and low-income segments of society.
- What is Sachetisation?
Adapted from the fast-moving consumer goods (FMCG) sector, where affordable sachets are used to penetrate price-sensitive markets, SEBI applies this strategy to encourage small, periodic investments by low-income earners in mutual funds.
Key Features of the ₹250 SIP Plan
- Target Audience: Aimed at low-income groups and first-time investors.
- Investment Limitations: Investors can start up to three ₹250 SIPs across different Asset Management Companies (AMCs). Additional SIPs won’t qualify for discounted rates.
- Eligible Schemes: Excludes debt schemes, sectoral and thematic funds, and small- or mid-cap equity schemes to minimise risks for new investors.
- Commitment: A five-year tenure (60 investments) is recommended, but early withdrawal is allowed.
- Payment Modes: Limited to National Automated Clearing House (NACH) and Unified Payment Interface (UPI) auto-pay for lower transaction costs.
- Distributor Incentives: Distributors and EOPs earn ₹500 per investor for facilitating 24 instalments.
- Cost Reductions: Discounted rates offered by AMCs, partially reimbursed through the Investor Education and Awareness Fund, with a break-even estimated in two years.
Benefits of Sachetisation
- Financial Inclusion: Reduces entry barriers for underserved populations, promoting financial empowerment.
- Market Penetration: Expands reach to remote areas and first-time investors, broadening the mutual fund investor base.
- Risk Mitigation: Limits investments to safer schemes, minimising risks for new investors.
- Market Stability: Deepens the domestic investor base, helping cushion the market against external shocks during volatile periods.
Challenges
- Distribution Costs: Small-ticket SIPs offer low returns for distributors; the ₹500 incentive may require adjustments for long-term sustainability.
- Operational Complexity: AMCs may face higher administrative burdens.
- Investor Awareness: Educating first-time investors is essential for the plan’s success.
