Sebi proposes sachetization of mutual funds to boost financial inclusion | Stock Market News

The Securities and Exchange Board of India (Sebi) has unveiled a proposal for promoting financial inclusion through the “sachetisation” of mutual fund (MFs) investments. Sachetisation refers to the process of offering financial products and services in smaller, more affordable packages, making them easier to access and manage.

The initiative proposes offering small-ticket investments, starting at just ₹250, to encourage low-income groups to begin their investment journey in mutual funds.

The consultation paper outlines a plan to make mutual funds more accessible to underserved sections of society, especially those who have limited means to invest. By introducing small, periodic investments through a Systematic Investment Plan (SIP), Sebi hopes to foster a culture of systematic savings and provide a sustainable route for individuals new to investing. “This can assist in financial empowerment of the underserved section of the economy and nudge fund houses to expand their footprints to even remote locations in the country,” the consultation paper said.

Impressive growth

The mutual fund industry has seen impressive growth in recent years, with Assets Under Management (AUM) increasing from ₹10 trillion in 2014 to ₹68.08 trillion as of November 2024. In parallel, the number of unique mutual fund investors has surged from 1.7 crore in 2018 to 5.18 crore by late 2024. 

However, despite this growth, there remains a significant gap in reaching lower-income and rural populations, a challenge that the sachetisation initiative seeks to address.

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The proposal, set to be implemented in collaboration with asset management companies (AMCs), offers a ₹250 SIP option. 

Key aspects of the proposal are:

Investors can start with a small SIP of ₹250, with a maximum of three such SIPs across different AMCs. This provides an affordable entry point for those with limited disposable income.

The payments will be restricted to auto-pay modes like NACH (National Automated Clearing House) and UPI (Unified Payment Interface), both of which are cost-effective for small-ticket investments.

Intermediaries involved in the process—such as stock exchanges, platforms, and payment gateways—have agreed to offer discounted rates to ensure faster breakeven for AMCs and make the scheme financially viable. 

Additional costs subsidized

Additional costs related to investor education and KYC (Know Your Customer) procedures will be subsidized through the Investor Education and Awareness Fund.

To encourage financial distributors and platforms to participate in this financial inclusion effort, they will be offered an incentive of ₹500 for each successful investor, provided the investor remains committed for at least two years.

All disclosures will be sent electronically, primarily through SMS and email, ensuring greater transparency and ease of access for investors.

The sachetisation model aims to make mutual funds more accessible to a broader population and gradually build up financial literacy and empower individuals to make informed decisions about their financial future.

With the cost of small-ticket SIPs expected to break even for AMCs within two years, the initiative is expected to drive significant growth in financial inclusion, especially in remote regions where financial services have been traditionally hard to reach.

The public is invited to provide feedback on the proposal until 6 February with detailed comments to be submitted through Sebi’s official consultation portal.