One of the most common questions about Specialized Investment Funds (SIFs) centres on accessibility: “Do I really need ₹10 lakh upfront to invest in a SIF?” The short answer is nuanced while SEBI mandates a ₹10 lakh Minimum Investment Threshold (MIT) for non-accredited investors, the regulator now explicitly permits Systematic Investment Plans (SIP), Systematic Withdrawal Plans (SWP), and Systematic Transfer Plans (STP) within SIF schemes. This creates flexibility in how you reach and maintain that threshold, though it doesn’t eliminate the requirement itself.
Understanding how SIP in SIF, SWP in SIF, and STP in SIF work within SEBI’s regulatory framework is essential for investors considering these sophisticated products. This guide explains the ₹10 lakh minimum investment rule, how systematic plans function within that constraint, and what “active” versus “passive” breaches mean for your investment flexibility.
The ₹10 Lakh Minimum Investment Threshold: Core Rules
Before exploring systematic plans, it’s crucial to understand SEBI’s foundational SIF minimum investment requirement and how it operates.
PAN-Level, AMC-Level Aggregation
The ₹10 lakh Minimum Investment Threshold applies at two levels simultaneously:
Per PAN (Permanent Account Number): All SIF investments under your PAN with a specific Asset Management Company are aggregated
Per AMC (Asset Management Company): The threshold applies separately for each fund house; your HDFC SIF and ICICI SIF holdings are calculated independently
Critical Clarification: The ₹10 lakh requirement applies only to your total SIF holdings with that AMC, not your regular mutual fund investments. You can hold ₹50,000 in a regular HDFC equity fund while building your HDFC SIF position; these are tracked separately.
Example:
Investor holds:
- HDFC Long-Short Equity SIF: ₹6 lakh
- HDFC Market Neutral SIF: ₹5 lakh
- HDFC Flexi Cap Fund (regular mutual fund): ₹2 lakh
Total SIF holding with HDFC AMC: ₹11 lakh ✅ (Complies with MIT)
Regular mutual fund excluded from calculation
Who Is Exempt?
Accredited Investors as defined under SEBI regulations are exempt from the ₹10 lakh MIT and can invest smaller amounts if the AMC permits. Accredited investor status typically requires meeting specific income, net worth, or professional qualification criteria. For most retail investors, however, the ₹10 lakh threshold remains mandatory.
How SIP Works in SIFs: Phased Entry to ₹10 Lakh
A Systematic Investment Plan (SIP) in SIF allows you to build your position gradually rather than committing ₹10 lakh upfront in a single transaction. This addresses liquidity constraints and enables rupee-cost averaging into specialized strategies.
The Cumulative Value Principle
SEBI’s framework allows AMCs to offer SIP/STP mechanisms to help investors build up to the ₹10 lakh threshold gradually, provided the structure and plan ensure eventual compliance. The MIT is expected to be maintained at ₹10 lakh or above, with AMCs monitoring positions and providing rectification mechanisms where needed.
Practical Implementation:
Example 1: Monthly ₹1 Lakh SIP
- Month 1: Invest ₹1 lakh (Total: ₹1 lakh)
- Month 2: Invest ₹1 lakh (Total: ₹2 lakh + market movement)
- Continue for 10 months
- By Month 10: Total reaches ₹10 lakh+ (assuming no major market decline)
Example 2: Smaller, Longer SIP
- Monthly SIP: ₹50,000
- Duration: 20 months
- Gradual accumulation to ₹10 lakh threshold
Key Consideration: Market volatility affects your progress. If your first few SIP instalments decline in value, you’ll need more instalments to reach ₹10 lakh. AMCs allow phased buildup via SIP/STP to reach ₹10 lakh, provided the plan and structure ensure eventual compliance with the minimum threshold.
Post-Threshold Flexibility
Once your cumulative SIF value crosses ₹10 lakh, you gain operational flexibility:
- Continue additional SIPs at any frequency or amount
- Make lump-sum top-ups as desired
- Execute tactical switches between SIF schemes within the same AMC
- Maintain the position as long as it doesn’t fall below ₹10 lakh due to your transactions
Important: Maintaining a long-term SIF position below ₹10 lakh is not permitted for non-accredited investors under SEBI’s regulatory framework.
How SWP Works in SIFs: Systematic Withdrawals Within Constraints
A Systematic Withdrawal Plan (SWP) in SIF enables regular cash flow generation; monthly or quarterly withdrawals similar to regular mutual fund SWPs. However, SEBI’s ₹10 lakh minimum creates specific constraints on SWP sizing and execution.
The Post-Withdrawal Value Rule
Every SWP instalment must be sized so that your remaining SIF value after withdrawal stays at or above ₹10 lakh. If a proposed SWP would breach this threshold, the AMC is expected to block such partial withdrawals and, if you wish to go below ₹10 lakh, guide you towards fully exiting your remaining SIF units through monitoring and corrective action processes.
Practical Example:
Current SIF holding: ₹15 lakh
Desired monthly SWP: ₹50,000
Month 1: Withdraw ₹50,000 → Remaining: ₹14.5 lakh ✅ (Above threshold)
Month 2: Withdraw ₹50,000 → Remaining: ₹14 lakh ✅
Month 3: Market declines 10% → Value falls to ₹12.6 lakh
Month 4: Withdraw ₹50,000 → Remaining: ₹12.1 lakh ✅
Months 5-6: Further declines → Value now ₹10.8 lakh
Month 7: Proposed SWP ₹50,000 → Would leave ₹10.3 lakh ✅
Month 8: Value at ₹10.3 lakh, proposed SWP ₹50,000 → Would leave ₹9.8 lakh ❌ (AMC expected to block; corrective action or full exit required)
Strategic SWP Management
For effective SWP usage in SIFs:
Maintain Cushion: Start SWPs when corpus is ₹12-15 lakh+, providing buffer against market volatility
Conservative Sizing: Withdraw smaller percentages (3-4% annually) rather than aggressive amounts
Monitor Regularly: Track remaining value after each withdrawal to anticipate threshold proximity
Plan Exit Strategy: If approaching ₹10 lakh, decide whether to halt SWPs, add capital to restore compliance, or execute full redemption
Reality Check: SWP flexibility in SIFs is significantly more constrained than in regular mutual funds, where you can withdraw down to the last rupee. The ₹10 lakh floor makes SIF SWPs practical only for larger holdings with comfortable margins.
How STP Works In and Around SIFs
Systematic Transfer Plans (STPs) in SIF facilitate gradual movement of capital either into SIFs (from other schemes) or out of SIFs (to other schemes within the same AMC). The direction of transfer determines how SEBI’s MIT applies.
STP Into SIFs: Structured Entry
When transferring money gradually into SIFs from another scheme (typically a liquid fund or conservative hybrid fund), STPs function similarly to SIPs:
Process:
- Park ₹10 lakh in HDFC Liquid Fund
- Set up STP: ₹1 lakh monthly into HDFC Long-Short Equity SIF
- Over 10 months, systematically build SIF position
- Once SIF value crosses ₹10 lakh, threshold satisfied
Advantage: Earns liquid fund returns on pending capital while gradually entering specialized SIF strategy, potentially reducing market timing risk.
STP Out of SIFs: Constrained Exit
When transferring money out of SIFs to other schemes within the same AMC, the active breach rule applies:
If repeated STP instalments would leave your SIF balance below ₹10 lakh, the AMC is expected to block such partial transfers and, if you wish to proceed with reducing your position below the threshold, guide you towards fully exiting your remaining SIF units through monitoring and corrective action.
Practical Limitation:
Current SIF holding: ₹12 lakh
Desired STP: ₹1 lakh monthly to HDFC Flexi Cap Fund
Month 1: Transfer ₹1 lakh → SIF remaining: ₹11 lakh ✅
Month 2: Transfer ₹1 lakh → SIF remaining: ₹10 lakh ✅
Month 3: Proposed transfer ₹1 lakh → Would leave ₹9 lakh ❌ (AMC expected to block; full exit or corrective action required)
Conclusion: STP-out from SIFs works best as a staggered exit mechanism when you hold significantly above ₹10 lakh, not as a tool to gradually reduce to a small residual position.
Active vs. Passive Breaches: Understanding Compliance
SEBI distinguishes between two types of MIT breaches, with different regulatory treatments:
Active Breach
An active breach occurs when you initiate a transaction that would push your SIF holding below ₹10 lakh:
Examples:
- Redeeming ₹3 lakh from ₹12 lakh SIF holding (leaving ₹9 lakh)
- Executing SWP that reduces balance below threshold
- STP-out leaving sub-₹10 lakh residue
AMC Response: Expected to block partial transactions that would create active breaches through monitoring and corrective action mechanisms. SEBI’s framework provides processes where investors can either top up to restore compliance or fully exit their SIF positions.
Rationale: Prevents deliberate circumvention of MIT through incremental withdrawals.
Passive Breach
A passive breach occurs when market movements alone cause your SIF value to fall below ₹10 lakh without any transaction on your part.
Example:
- Initial SIF holding: ₹10.5 lakh
- Market declines 8%
- Value falls to ₹9.66 lakh
- No transaction initiated by you
Regulatory Treatment: The decline itself is not a violation per se – you’re not penalized for market volatility. However, while below ₹10 lakh:
Permitted: Full redemption (exit entirely)
Permitted: Additional purchases to bring value back above ₹10 lakh
Not Permitted: Partial withdrawals that keep you invested below MIT
Practical Implication: If markets push you into passive breach, you can either add capital to restore compliance or exit fully but SEBI’s framework expects compliance to be restored, with AMCs monitoring positions and providing corrective action opportunities.
Can You Really “Start Small” with SIFs?
The answer requires precise framing:
What “Starting Small” DOES Mean:
✅ Using SIP to build toward ₹10 lakh gradually over months rather than deploying the full amount immediately
✅ Utilizing STP from liquid funds to systematically enter SIF strategies
✅ Managing cash flow timing through phased entry mechanisms
What “Starting Small” DOES NOT Mean:
❌ Maintaining permanent SIF holdings below ₹10 lakh (not permitted for non-accredited investors)
❌ Testing SIF strategies with ₹2-3 lakh investments indefinitely
❌ Circumventing MIT through continuous SIP without crossing the threshold
The Bottom Line:
For non-accredited investors, the ₹10 lakh per PAN per AMC threshold is non-negotiable. Systematic plans provide flexibility in timing and method of reaching that level, not exemption from it. SIFs remain targeted at relatively high-ticket, market-savvy investors with capital capacity and risk tolerance matching these sophisticated products.
For investors unable or unwilling to allocate ₹10 lakh at the PAN-AMC level, traditional mutual funds including equity, hybrid, and thematic schemes continue to be more appropriate vehicles offering accessibility without high minimum thresholds.
Conclusion
SEBI’s decision to permit SIP, SWP, and STP in SIFs enhances operational flexibility while maintaining the ₹10 lakh Minimum Investment Threshold designed to ensure these sophisticated products reach appropriate investor segments. Systematic plans make it operationally easier to phase entry and exit while still respecting SEBI’s ₹10 lakh minimum.
Understanding active versus passive breaches, maintaining cushions above thresholds for SWP/STP flexibility, and recognizing that compliance is expected to be maintained are essential for anyone considering SIF investments. SEBI enforces compliance through AMC monitoring and corrective action processes, but the fundamental requirement remains: non-accredited investors must maintain at least ₹10 lakh in aggregate SIF holdings per AMC at the PAN level.
These products remain specialized solutions for experienced investors with adequate capital, but systematic plans make the operational journey into and out of SIF strategies more manageable for those who qualify.
Disclaimer: This article provides general educational information about SIF systematic plan mechanisms and regulatory requirements based on SEBI circulars effective from April 1, 2025, and AMC guidance. It does not constitute investment advice or recommendation of specific schemes. Investors should review official scheme documents, verify current SEBI regulations, and consult SEBI-registered financial advisors before making investment decisions.