From Savings to Investments: SBI’s ?250 SIP Revolutionizing Wealth Creation

State Bank of India’s (SBI) introduction of the Jan Nivesh SIP scheme is a pivotal move towards enhancing financial inclusion in India. By allowing investments starting at ?250 per month, this initiative opens the doors of wealth creation to a wider section of the population, especially those from low and moderate-income segments, traditionally underserved in the formal financial system.

Mutual Fund Penetration Among Low and Moderate-Income Segments

Despite the growth of India’s mutual fund industry, penetration remains limited, especially among low and moderate-income groups:

• Limited Participation: As of December 2024, only about 3% of India’s population invests in mutual funds, indicating significant underpenetration.?
• Urban Concentration: The majority of mutual fund assets are concentrated in the top 15 cities, leaving rural and semi-urban areas with minimal exposure and awareness.?

Declining Household Savings: A Growing Concern

The financial behavior of Indian households has seen a concerning shift, which has significant implications for the country’s financial health:

• Decreasing Savings Rate: Net household financial savings have fallen to a five-decade low of 5.1% of GDP in FY23, down from 7.2% in the previous fiscal year. signaling a trend of reduced financial cushion among families.
• Rising Liabilities: Household financial liabilities have increased sharply, with annual borrowings rising to 5.8% of GDP in FY23, compared to 3.8% in FY22, further highlighting the financial stress on Indian households..?

Leveraging India Stack for Cost-Effective Onboarding

The integration of India Stack, a comprehensive digital infrastructure, has revolutionized the onboarding process:

• Cost Reduction: Traditional customer onboarding in banks cost approximately ? 23 per individual. With digital public infrastructure, this expense has been reduced to a mere ? 0.10, representing a 99.5% cost reduction.?
• Operational Efficiency: Digital processes have significantly decreased the time required for customer verification and account setup, enabling financial institutions to serve a larger customer base swiftly and efficiently.

The Role of Business Correspondents in Expanding Reach

To maximize the impact of the Jan Nivesh SIP, leveraging SBI’s extensive network of Business Correspondents (BCs) is crucial:

• Enhanced Accessibility: BCs can facilitate investments in remote areas, bringing financial products to the doorstep of underserved populations.
• Building Trust: Personal interactions with BCs can demystify financial products, fostering trust and encouraging participation from individuals who may otherwise feel disconnected from the financial system.

A Call to Action

The Jan Nivesh SIP exemplifies a strategic approach to overcoming the financial inclusion gap, addressing the unique challenges faced by low and moderate-income segments. Policymakers, regulators, and financial institutions are encouraged to:

• Promote Product Innovation: Design financial products that align with the financial capacities and needs of underserved populations.
• Enhance Digital Integration: Utilize platforms like India Stack to reduce operational costs and streamline customer onboarding.
• Strengthen Collaborative Distribution: Empower local agents and BCs to bridge the gap between financial institutions and remote communities.

By embracing these strategies, India can make significant strides towards comprehensive financial inclusion, ensuring that wealth-creation opportunities are accessible to all. especially those traditionally excluded from the formal financial system.

Ashwini Tewari PRAKASH SABOO Shiva om Dikshit State Bank of India