Last Updated on Feb 27, 2025 by Harshit Singh
Before diving into the details, let’s first understand the concept of “sachetisation.”
‘Sachetisation’ in a Mutual Fund segment refers to the breaking down of the investments into smaller and more affordable portions encouraging individuals from economic backgrounds to gradually build wealth through regular and affordable investments.
The concept of sachetisation has originated from India’s Fast-moving Consumer Goods (FMCG) sector. It is popularised by selling everyday products like shampoos and instant coffee in small packets. This innovation enabled rural and low-income consumers to purchase quality products at a fraction of the cost of larger packages, thus increasing market penetration.
The idea has since expanded beyond the FMCG sector into various other sectors, including finance.
Applying the same concept into the financial sector, the Securities and Exchange Board of India (SEBI) on January 22, 2025 has issued a consultation paper on promoting financial inclusion by introducing small-ticket Systematic Investment Plans (SIPs) with a minimum investment of just ₹250. This move will encourage systematic savings, and make mutual fund investments more accessible to individuals from all economic backgrounds.
In the current scenario, there are a few Asset Management Companies (AMCs) offering small ticket SIPs as low as ₹100 under a some of their mutual fund scheme the ₹250 SIP proposal of SEBI, will allow the entire industry to participate in the “cause of financial inclusion.”
Table of Contents
SEBI’s Proposal: A Closer Look
On January 22, 2025, SEBI released a consultation paper titled “Promoting Financial Inclusion through Sachetisation of Investment in Mutual Fund Schemes.” The key features of this proposal include:
- Minimum Investment Amount: Investors can start SIPs with as little as ₹250 per installment.
- Investment Limit: An investor can initiate up to three small-ticket SIPs, one each up to three different AMCs.
- Scheme Eligibility: These small-ticket SIPs can be offered under growth option of the plan and in various schemes, excluding debt schemes, sectoral & thematic schemes and small-cap and mid-cap equity schemes.
- Payment Modes: To keep the transaction costs low, investments will be made only through the National Automated Clearing House (NACH) and Unified Payment Interface (UPI) autopay modes.
- Distributor Incentives: To encourage distributors/ EOPs to promote these small-ticket SIPs, SEBI provides an opportunity for the entire industry to participate in the “cause of financial inclusion.” It proposes an incentive of ₹500 per investor, which would be over and above the distribution commission paid by AMCs. The incentive shall be restricted to the first small ticket SIP started under this scheme and may be extended to them for educating an investor new to the Mutual Fund industry and facilitating sustainable long-term investment. However, the incentive should only be given to the distributors/EOPs on completing 24 instalments (2 years for monthly SIP or 1 year for fortnightly SIP).
- Commitment Period: Investors are encouraged to commit to these SIPs for a period of five years (60 investments). However, there are no restrictions on premature withdrawal or stopping the SIP.
Why is SEBI Doing This?
India’s mutual fund industry is growing rapidly. Even then, there remains an opportunity to extend mutual fund investments to all sections of society. The sachetisation approach aims to:
- Promote Financial Inclusion: By lowering the entry barrier, individuals from low-income groups can participate in mutual fund investments.
- Encourage Systematic Savings: Small and regular investments can help inculcate a habit of saving among new investors.
- Expand Mutual Fund Reach: This initiative nudges fund houses to extend their services to remote areas, broadening their investor base.
SEBI, by introducing the said proposal, believes that such small-ticket investments can lead to financial empowerment of the underserved sections of the economy.
How Much Wealth Can a ₹250 SIP Create?
To understand the potential, let’s assume a ₹250 SIP is invested in a mutual fund offering 12% annual returns:
10 years → ₹250 SIP grows to approximately ₹58,000
15 years → Approximately ₹1.26 lakh
20 years → Approximately ₹2.50 lakh
Please note: The above numbers are based on internal calculations from our SIP calculator without inflation adjusted. The calculation shown above is intended solely for educational purposes, offering conceptual clarity to investors based on the information provided. Full complete disclaimer here.
Considerations for Investors
While the SEBI initiative might be promising, potential investors should keep the following things in mind:
- Investment Horizon: SIPs may be effective when maintained over the long term.
- Scheme Selection: Investors are advised to choose those schemes that align with their financial goals and risk tolerance.
- Cost Implications: Be aware of the associated costs, hence it is advisable to check the expense ratio, exit loads, and other charges associated with the fund, as these may impact the returns.
- Estimate Returns: Use an SIP calculator to estimate your potential returns and determine the right investment amount to achieve your goals.
To Wrap Up
SEBI’s proposal to introduce small-ticket SIPs of ₹250 is a step towards making mutual fund investments more inclusive. This initiative by the capital market regulator could mark a significant step towards democratising investment opportunities in India, making it easier for everyone including low income groups to participate in wealth creation through mutual funds.
Disclaimers:
An Investor education and awareness initiative by Zerodha Mutual Fund.
Know Your Customer: To invest in the schemes of Mutual Fund (MF), an investor needs to be compliant with the KYC (Know Your Customer) norms and the procedure is -> Fill the Common KYC (CKYC) application form by referring to the instructions given below:
Enclose self-certified copies of both proof of identity and address. For Proof of Identity, submit any one document – PAN/ passport / voter ID/ driving license/ Aadhaar / NREGA job card/ any other document notified by central government. Proof of address, submit any one document which is the same as the proof of identity, except for PAN (since this document does not specify the address). If your permanent address is different from the correspondence address, then you need to submit proof for both the addresses. Documents Attestation – By any one from the authorized officials as mentioned under instructions printed on the CKYC application form. PAN Exempt Investor Category (PEKRN) – Refers to investments (including SIPs) in MF schemes up to INR 50,000/- per investor per year per Mutual Fund. This set of investors need to submit alternate proof of identity in lieu of PAN. In Person Verification (IPV) – This is a mandatory requirement and can be done by the list of officials mentioned in the instructions printed overleaf on the CKYC application form. Please submit the completed CKYC application form along with supporting documents at any of the point of acceptance like offices of the Mutual Fund/ Registrar, etc.
Investors may also complete their KYC online through Aadhar OTP-based authentication. Visit the respective fund house website or contact their customer care to know more about the process.
Modification to existing details like address/ contact details/ name etc. in KYC records – For any modifications to be done to the existing KYC details, the process remains same as mentioned above, except that only the details to be changed needs to be mentioned on the form along with PAN/ PEKRN and submitted with the relevant proofs.
Modification to your existing details like contact details/ name/ tax status/ bank details/nomination/ FATCA etc in Fund House records – Please visit the website of the respective Fund House to understand the procedure to update the details (if published) OR reach out to the customer service team of the respective Fund House.
Dealing with registered Mutual Funds
Investors are urged to deal with registered Mutual Funds only, details of which can be verified on the SEBI website (www.sebi.gov.in) under Intermediaries/ Market Infrastructure Institutions.
Redressal of Complaints
If you have any queries, grievances or complaints pertaining to your investments, you may approach the respective Fund House through various avenues published on their website. If you are not satisfied with the responses provided by the Fund House, you may then register your complaint on SCORES (Sebi Complaints Redress System) portal provided by SEBI for which the link is -> https://scores.sebi.gov.in
Other Disclaimer: The Content of this article/document is for educational and informational purposes only and should not be construed as financial advice. Please consult your financial advisor for advice suited to your specific circumstances.
Investing in mutual funds and other financial products involves risk, including the potential loss of principal. Past performance is not indicative of future results. Before making any investment decisions, investors should conduct their own research and seek advice from qualified financial advisors to ensure that the respective products and strategies are suitable for their specific financial situation and objectives.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully.
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