The newly launched Rs. 250/month SIP comes with a penal clause – 7% return with an exit load of 1%. While this scheme may fulfil the long-standing vision of SEBI Chairperson Mrs. Madhabi Puri Buch, who has been advocating for such a plan, the associated caveats present significant concerns. The structure of this scheme seems to target rural and small-town investors, enticing them to support the stock market. However, despite its appeal, the riders of this scheme raise red flags. Although there is no lock-in period, there is a 1% exit load if one withdraws their investment within one year. Let’s take a closer look at this scheme.
Old Wine in a Fancy Bottle: The Rs. 250/month SIP is offered by SBI Mutual Fund, India’s largest mutual fund AMC. The scheme has been named SBI JanNivesh SIP, inspired by the Jan Dhan Yojana initiative. It enables investors to invest in the SBI Balanced Advantage Fund – Regular Growth. This hybrid fund is an open-ended dynamic asset allocation fund, meaning investors can withdraw their money at any time. “Dynamic asset allocation” means the scheme adjusts its investment between equity and debt based on market conditions. In a market downturn, it may shift entirely to debt, while in a favourable market, it could allocate 100% to equities. The fund has been flagged as high-risk, with a one-year return of approximately 7.18% and a corpus of around Rs. 33,000 crores. It’s clear that the Rs. 250/month SIP is a variant of SBI AMC’s existing high-risk fund, SBI Balanced Advantage Fund, which offers a moderate return of around 7.18%.
The Gimmick Behind the Scheme: Previously, SBI Balanced Advantage Fund required a minimum SIP of Rs. 500 per month, but with the new offering, it allows a Rs. 250/month SIP. However, it’s not a cheap option. The scheme has an expense ratio of 1.57%. For comparison, the HDFC Balanced Advantage Fund – Growth, has an expense ratio of only 1.36% and a one-year return of 8.16% (better than SBI’s 7.18% return). The fine print reveals that SBI JanNivesh SIP will charge an exit load of 1% if the investment is redeemed within one year. The waiver of bank charges for investing into SBI JanNivesh SIP would have negligible impact on overall expense.
In an unexpected move, SBI JanNivesh SIP offers three option of SIP: weekly, fortnightly, and monthly, with the default being fortnightly. If investors aren’t careful when setting up their SIP, they might find themselves paying Rs. 250 twice a month instead of just once. The scheme is marketed through large platforms like Paytm, Groww, and Zerodha, with Paytm claiming that a Rs. 250 weekly SIP could grow to Rs. 43,546 by 2028. However, this estimate seems misleading.
Why does a Rs. 250/month SIP have options for weekly and fortnightly investments? If the goal is to promote wealth creation in rural India and small towns, why didn’t India Post get involved in this initiative? Instead, popular, cosmopolitan platforms like Groww and Zerodha were chosen. Could this be an attempt to compensate these broking giants for lost revenue from F&O trading? And is the Rs. 250 SIP an effort to prop up a fluctuating stock market and provide a safe exit for FIIs at the expense of unsuspecting rural investors?
Rural India’s Investment Style: For rural Indians, State Bank of India, India Post, and LIC have long been the preferred investment options. Villagers tend to avoid withdrawing deposits or redeeming investments prematurely, preserving their savings for tougher times. Their stable investments provide crucial support to India’s financial system. If launched with integrity and innovation, a Rs. 250/month SIP could play a significant role in stabilizing the Indian financial market.
SEBI deserves praise for its concern for retail investors, but it must proceed with caution. Rushed execution of such ideas may benefit market forces at the cost of vulnerable investors. The SBI JanNivesh scheme, while well-intentioned, could have unintended consequences if not carefully monitored.
