Micro SIPs - systematic investment plans of Rs 250 - that were launched with much fanfare in February by former Sebi Chairperson Madhabi Puri Buch, has seen a rather subdued growth, with industry data showing that less than 900 such SIP accounts have been opened till date with less than a dozen asset management companies (AMCs) showing interest for the product.
Industry representative told Moneycontrol that while a few more fund houses are planning to launch micro SIPs, the decision is linked more with the regulatory push rather than real business potential. Industry players have attributed the subdued growth to an unfriendly regulatory framework, at a time when many AMCs are already offering SIPs with a minimum value of less than Rs 250.
“There are AMCs that offer Rs 100 SIPs under the normal course of business, or in other words under the normal distribution channels, which works fine for both, the fund house and the distributor,” said a marketing head of a foreign mutual fund.
“This is an important point because the incentive structure of a micro SIP is not ‘distributor friendly’ and hence there is no real push. If you are getting a SIP activated today, you will not want to wait for two years to get the incentives, right?” he added.
The regulatory framework for micro SIPs states that the incentives will be given to the distributors or the platforms only on completion of 24 instalments, two years for monthly SIPs or one year for fortnightly SIPs.
While the framework allows an incentive of Rs 500 per account, it is restricted to a maximum of three micro SIPs, and more importantly, it is subject to the investor not making any investment other than the micro SIP.
“It is a bit far-fetched to assume that the investor will not open any more accounts. Once someone understands equity investment and becomes confident, there is a high probability that he or she will start new investments. If that happens, the distributor incentive is gone. So why will distributors push for such a product,” said a sales head of a leading domestic mutual fund firm.
“One needs to understand that distributors are selling micro SIPs of Rs 100 even today as they are assured of a commission. So it is not about the value of the SIP but the commission structure needs to be reviewed if it needs to be popularised,” he added requesting not to be identified.
At the time of the launch of the micro SIP, Buch had said that a Rs 250 SIP was ‘one of my 'fondest dreams'. In fact, she also said that the entire mutual fund ecosystem, including Registrar and Transfer Agents (RTAs), KYC Registration Agencies (KRAs), and depositories, collaborated to make the micro SIP feasible.
Disclaimer: The views and investment tips expressed by experts on Moneycontrol are their own and not those of the website or its management. Moneycontrol advises users to check with certified experts before taking any investment decisions.
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