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While SEBI contemplates to introduce low value SIP by reducing the minimum SIP contribution per month from Rs.500 to Rs.250, the MF industry is already offering SIPs of a much lower value.
An analysis of industry data shows that 15 fund houses – Aditya Birla Sun Life Mutual Fund, Axis Mutual Fund, Bandhan Mutual Fund, DSP Mutual Fund, Edelweiss Mutual Fund, Groww Mutual Fund, HDFC Mutual Fund, ICICI Prudential Mutual Fund, Kotak Mutual Fund, Nippon India Mutual Fund, Sundaram Mutual Fund, Tata Mutual Fund, UTI Mutual Fund, WhiteOak Capital Mutual Fund and Zerodha Fund House have been offering low value SIP of Rs.100.
Manish Mehta, National Head – Sales, Kotak MF believes that the Rs. 100 starting point is just an enabler for investors who are hesitant to invest in mutual funds. He said, “Despite the Rs. 100 starting point, the industry average for SIPs is around Rs. 2300. So, this lower limit is just an enabler, which nudges new investors to get rid of their psychological barriers and start investing in mutual funds.” In terms of transaction costs in low value SIPs, Manish said, “A lot of such SIPs allow UPI as a mode of payment which keeps the transaction costs low.”
Sharing the experience of his fund house with low value SIP, Gaurab Parija, Head – Sales & Marketing, Bandhan MF said that many investors who started low value SIPs eventually increase their contribution. He said, “There has been a lot of noise about this matter. Obviously, a large number of low value SIPs will make it unviable for the AMC. But our data shows that most of the investors who start with a Rs. 100 SIP do not stop at this low value and eventually steps up the SIP amount. This is why we have continued with SIP of Rs. 100.”
DP Singh, Deputy MD & Joint CEO, SBI MF believes that currently, a Rs. 100 SIP is not financially viable for SBI MF as the operational expenses are too high. He added that the fund house is working to find a way to bring down the minimum investment amount for SIP from its current levels.
Akhil Chaturvedi, CBO, Motilal Oswal MF also echoed a similar statement. He believes that the transaction costs are too high for any transactions done on exchange platforms. In his experience, the fund house has to go out of pocket to offer such services. A simple calculation indicates that low value SIP will take 3-4 years to break even, he added.
