SIP, is this something new ?

"MANY DROPS MAKE A FLOOD"....Pigmy Deposit Scheme

After August 2010 , when SEBI removed entry load for Mutual Funds, it was no more as lucarative for financial advisors to recommend MFs .

MFs had to find ways not only for investor to continue to invest in them but also to stay invested and suddenly they started seeing SIPs as the panacea for all their problems.

If you see how SIP's works , it is exactly like a Recurring deposit . Recurring deposits are deposits where a investor is suppose to invest a fixed amount every month on a date chosen by the investor .

When we are on Recurring deposit , let me tell you about a very innovative scheme that was run since my childhood by Syndicate Bank this was called Pigmy Deposit Scheme . This was innovation in every sense of word , not ony did it generate employment for large number of people , but also helped people to save in denominations as small as Rs.10 and helped the bank raise low cost deposits .

The way Pigmy Deposit Scheme worked was exactly like a Recurring Deposit ,but the difference was, the Pigmy Agent would visit the investor and collect the amount from the investor's doorstep and deposit the amount in the bank and the agent would get paid a commision based on the amount collected.

Pigmy Agent was an agent of the bank and not an employee so that kind of freed the banks to engage large number of agents as there was no recruitment red tapism involved and for the investor it helped them build descipline to save and there was no question of forgetting to save , as the agents would promptly come to collect the amount.

This was a win win for all invoved . We now have to wait and see how successful would SIP prove for all involved .

Image : FreeDigitalPhotos.net,Photographer: hinnamsaisuy