The Securities and Exchange Board of India (SEBI) has proposed micro-SIP (Systematic Investment Plan) of ₹250 aimed at promoting financial inclusion. While the idea has been largely welcomed for its potential to widen access to mutual funds, industry insiders warn that its execution could face significant challenges due to transaction costs and distribution inefficiencies. Capitalmind founder-CEO Deepak Shenoy dissected the proposal, highlighting key hurdles. “The problem with a ₹250 SIP is not that it’s too small. At scale, funds would be happy to accept even ₹1,” he wrote. “The real issue lies in transaction costs, such as gateway fees and registrar processing charges. For instance, at ₹2 per transaction, that’s 0.8%—higher than most direct TERs.” TER is total expense ratio. Shenoy also pointed out the limited incentives for distributors to promote such plans. “Distribution simply isn’t going to bother, and directly reaching investors at a ₹250 SIP level is costly. Expense ratio limits mean this can only be subsidized by large funds, leaving small or new funds unable to compete.” Distributors share a similar concern, noting that small-ticket investors often require additional hand-holding, which raises costs. Despite SEBI’s proposed ₹500 incentive for first-time investors, experts argue that these incentives may not sufficiently cover onboarding expenses, including KYC and advisory services. Anil Rego of Right Horizons underscored the challenge in an Moneycontrol report : “The real test is ensuring long-term servicing for small investors, especially during market downturns. This requires consistent guidance and support.” Still, the potential for financial inclusion is undeniable. Experts see the micro-SIP as a tool to break barriers for low-income individuals, including domestic workers and drivers. As investors gain confidence, they are likely to increase contributions. Success hinges on scale, they add. Shenoy suggests that the model’s success depends on drastically reducing transaction costs, potentially through bulk deals negotiated at the AMFI or SEBI level. “It’s the habit-forming aspect that’s important—even a weekly habit of ₹100 can help new investors break into mutual funds,” he explained.
