By pioneering the concept of paperless SIP’s (Systematic Investment Plans), BSE (Bombay Stock Exchange) may have cracked the code when it comes to solving the problem of last mile connectivity for registering new SIP accounts for Mutual Fund investors.
Launched in 2009, BSE’s feature laden and highly flexible StAR MF platform has been picking up the pace at a rate of knots this year. The platform has emerged as the pre-eminent choice for distributors to purchase and redeem Mutual Fund units on behalf of their clients, without the need to move unwieldy stacks of papers back and forth. In early September, the BSE StAR platform clocked a record-smashing 1 lakh transactions in a single day’s trade.
In recent years, there has been a concerted push from the industry to increase the penetration of SIP’s within the community of Indian savers. A sizeable fraction of the mandated Rs. 300 Crore plus annual Investor Awareness budget of AMC’s flows towards this endeavour, with a high degree of emphasis on investors residing in B-15 cities and towns. SIP’s are widely believed to be the best way for retail clients to take an exposure to equity mutual funds in a risk-controlled manner, allowing them to optimise their long-term savings and achieve superior capital appreciation in the process. The industry-wide count of live SIP’s crossed 1 Crore a few months back.
The concept of paperless SIP’s promises to be an important catalyst in the bid to divert a larger quantum of Indian household savings into equity mutual funds. At present, Mutual Fund distributors need to get physical ACH mandate forms filled out by new SIP applicants. This often leads to leakages; either in the form of rejected applications, or fallouts and delays at the last stage of the sales funnel, spelling consternation for intermediaries who toil hard to mobilise small ticket investments. Paperless SIP’s have the potential to not just help plug a lot of these leakages, but to increase the breadth and depth of the customer bases managed by intermediaries as well.
According to a process note released on BSE’s website, paperless SIP’s (dubbed ‘iSIP’ by BSE) will initially be available for non-demat mode SIP’s with instalments of under Rs 2 lakh. To enable the SIP, the BSE StAR system will generate a 15-digit URN (Unique Registration Number) which will need to be added by a client to his or her net banking platform, thus eliminating the need for a paper mandate altogether.
“Subsequently, on the day of the SIP transaction, BSE will debit the client’s bank account on the basis of the standing instructions specified on the BSE URN”, said a BSE spokesperson. “The whole process is online and digital, and replaces the paper-based mandate with an electronic mandate”. The exchange is yet to disclose which payment aggregator they have tied up with to enable the mechanism.
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