The recently-launched JanNivesh Rs 250 systematic investment plan (SIP) by SBI Mutual Fund, along with Paytm, is a brave attempt to ensure that a large part of the country — rural and semi-urban — is not denied professional fund management services. But questions are being raised already whether it would achieve the desired results. This is not the first time that such a thing is being attempted. SBI Mutual Fund had launched Chota SIP with a minimum investment of Rs 100, with a lock-in period of five years, in 2009. However, the enthusiasm around it died soon, even though the Sensex rose a whopping 81% during that year. Perhaps, the 2008 financial crisis was too fresh in the minds of potential investors. This time, too, the launch comes when the indices have seen a steep fall. In January, the SIP closures were higher by 514,000 than new registrations. All these will make first-time investors more than a little wary.
These are valid points but there are reasons to feel more optimistic this time. The good news is that the Securities and Exchange Board of India (SEBI) has put its weight behind this attempt. It has successfully managed to convince the service providers to the asset management companies (AMCs) — distribution, registrar, and transfer agencies (RTAs) — to waive their fees for small-ticket SIPs. This reduces the cost of acquisition for AMCs significantly. In the past, AMCs did not get into small-ticket SIPs because the cost of acquiring customers was high. Also, given the fact that the average holding period for mutual fund schemes is around two-three years, it was a tough challenge.
Further, the tie-up with Paytm will play a crucial role in this venture. With its 300 million-strong customer base, Paytm’s digital platform is the ideal launchpad to get the rural and semi-urban population to participate. With their KYC already done, most are making multiple transactions through the platform, including paying bills, buying direct stocks, and even buying small units of gold. So, many may be tempted to start buying mutual fund units regularly through this route. It will be interesting to see whether other AMCs also join the bandwagon. Given the rise in the fintech industry, and with low transaction costs, this market would be hard to ignore. What might fire up the `67-lakh crore industry this time around is the impending entry of Jio Financial-BlackRock. Riding on Reliance Jio’s 461 million-strong subscriber base, the joint venture is all set to disrupt the market in a very big way.
The most important part of this journey, however, will be investor education. While JanNivesh will only invest in a comparatively safer scheme — SBI’s Balanced Advantage Fund — investors will need a helping hand in the initial few years to continue with their SIPs even during choppy market periods and benefit from long-term compounding. JanNivesh is an extension of the highly successful Pradhan Mantri Jan Dhan Yojana and Jan Suraksha — the troika of banking, life insurance, and investment. Yes, there would be questions that whether the targeted population — rural and semi-urban — should be taking the risky route of stock markets. Given that the share of “other cities” — not part of the top 20 cities — in stock trading has risen from 18% to 32% between 2014 and 2024, there is no reason why they should not get a shot at long-term wealth creation through mutual fund schemes.