The Securities and Exchange Board of India has released a consultation paper on ‘Promoting Financial Inclusion through Sachetisation of investment in Mutual Fund Schemes’ (“Consultation Paper”) with an aim to promote financial inclusion and attract small saving investments by investors. The Consultation Paper envisages a sachetised mutual fund product i.e. small ticket Systematic Investment Plan (“SIP”) of INR 250 (“Small Ticket SIP”).

Key features of the Consultation Paper:

1. Investment amount and discounted charges:

• the industry participants/ intermediaries (such as stock exchanges, execution-only platforms (“EOPs”), payment gateways, etc.) involved in mutual fund transactions would offer discounted rates on cost incurred towards these investments – such discounted rates will be offered for an investor for the first Small Ticket SIPs per asset management company (“AMC”) upto 3 AMCs;
• part of investment costs by AMCs would be compensated from the Investor Education and Awareness Fund; and
• in case the investor: (i) is an existing mutual fund investor; or (ii) has made a mutual fund investment other than a Small Ticket SIP; or (iii) makes a lumpsum investment, then the investor shall be ineligible to be consider as a Small Ticket SIP investor.

2. Schemes and Plans:

Small Ticket SIPs shall be offered: (a) only under ‘growth option’ of the plan; and (b) in schemes except debt schemes, sectoral & thematic schemes, small-cap and mid-cap schemes under equity schemes category.

3. PAN exempted KYC:

Small Ticket SIP investors may not have PAN and for this purpose, PAN exempted KYC Registration Number (PEKRN) based KYC, using AADHAR card will also be available for Small Ticket SIP.

4. Distribution commission:

An incentive of INR 500, per new investor is proposed to be provided to distributor/ EOPs for Small Ticket SIP, upon completion of 24 instalments by such investor – such amounts will be over and above the commission payable to distributors since their margins would be minimal.

5. Other features:

The Consultation Paper has also proposed that: (a) Small Ticket SIPs may be monthly or fortnightly; (b) commitment under Small Ticket SIP scheme should be for a period of 5 years i.e. 60 investments, but there is no restriction on investors to stop/ withdraw the SIP investment prematurely; and (c) AMCs shall ensure that a valid mobile number (email id being optional) of Small Ticket SIPs investor in maintained in their records for statutory disclosures. Where such disclosure is made through a link on mobile number and/ or email id, the link should remain active at all times and investor should be able to download the disclosures made thereunder.