Securities and Exchange Board of India (Sebi) chairperson Madhabi Puri Buch’s proposal to “sachetise” mutual fund schemes is a good idea and can go a long way in spreading the equity cult in the country. The fact is that several fund houses already offer systematic investment plans (SIPs) at `100 a month, both for equity and fixed income schemes. However, while they exist on paper, the schemes are not being marketed with any great enthusiasm. The reason is not hard to find: they are simply not remunerative. In fact, asset management companies (AMC) say, at `100 a month or an average of `1,800 over three years, they would hardly make any money. Of that, the cost of getting a Know Your Customer (KYC) done can be `50 and there are distribution expenses to consider as well. While distributors may settle for a lower fee for some period of time, they would expect to get compensated thereafter. Payment charges are a cost, too.
The industry has, on various occasions, pointed out that unless the costs are brought down, it would not be viable for players to market the sachet SIPs in a meaningful manner. They have suggested that the KYC should be common across all financial products. While regulators have agreed that this is the need of the hour, not much headway has been made. Perhaps the finance ministry can take the initiative and roll out a uniform KYC. Moreover, the AMCs have been pushing for payments via the Unified Payments Interface (UPI) given how cost-effective that is. However, nothing has happened so far. AMCs have pointed out they are willing to pay distributors a bigger fee but would like to see other costs being brought down.
Small package offerings, which are designed to transition from luxury to affordability, have transformed a few industries, including fast-moving consumer goods, telecom and direct-to-home. The assets under management (AUM) of the mutual funds is nudging the `50-trillion mark, but it has taken nearly six decades to get there. While the number of unique customers for MFs is a little over 40 million, the unique SIP customers account for more than 50% of this. The good news is that inflows into SIPs are now averaging `16,000 crore a month. Indeed, the financialisation of household savings is taking place rapidly. Equities as a share of net household financial assets went up to as high as 14.7% in FY23 from just 4.5% in FY21. It would be a pity if the larger population is not able to participate in this evolution.
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