Sebi move on reducing SIP minimum size good, but need to reduce KYC & transaction costs: Nilesh Shah

economictimes.indiatimes.com:

Nilesh Shah, MD, Kotak AMC, says “no one would like to run a loss-making business for long. Today, we are doing this more as an experimentation with the bottom of the pyramid and ensuring that our technology, our communication, and our services are up to their expectations. But once we put in place the KYC cost and the transaction processing cost, then the industry will go all out in marketing this SIP. My dream as an AMC CEO will be to ensure that no Indians get lured by Ponzi schemes, but all become my industry's SIP investors and secure financial future.”

The big trend which is happening is that SIP has become a household name now. It appears that now SEBI may look at taking a step forward for higher inclusion and reducing the minimum size to Rs 250. Will it make a lasting impression and much wider inclusion? From the AMC side, a Rs 500 SIP, how economic is it or is it that the larger, higher SIP part of the book, is subsidising this one because there are costs involved. What would you say?We have been running SIP for Rs 100 across our equity and fixed income fund. But as you correctly mentioned, it is a loss-making proposition for us. It is loss-making at two levels. One, typically people who are starting Rs 100, Rs 200, Rs 250 SIP are first-time investors into mutual funds and where we have to do KYC.

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The KYC cost is almost Rs 35 to Rs 50 per new KYC per first-time investor in the mutual fund. That means on a Rs 100 SIP, I actually end up paying 35% cost upfront.