Reliance Capital Asset Management issued a notice to its investors changing the minimum limit in its scheme –Reliance Liquid Fund ( Treasury Plan) – from ₹ 5,000 to ₹ 100. Also, the limit of any additional application has been reduced from ₹ 1,000 to ₹ 100.

Said Sundeep Sikka, chief executive officer, Reliance Mutual Fund: "We want to target the retail investors in smaller towns for all our schemes. Our strategy is like an FMCG ( fast- moving consumer goods) company's sachet strategy, whereby they want to break the barrier in the user's mind with low- expense products." The reduction in limit for liquid funds, the minimum ever according to industry players and distributors, has surprised many industry players. Liquid schemes are typically targeted towards high networth individuals (HNIs) and corporate clients. The minimum limits of these schemes, consequently, are on the higher side.

Liquid funds are short- term funds that invest in instruments with maturities of three to six months. Their investments are mostly in money market instruments, shortterm corporate deposits and treasury. The average maturity of these schemes ranges between four and 91 days.

Said a fund manager of an asset management company: Reliance MF is clearly looking at retail investors who don't invest so much in such funds because of their short- term nature." However, some players doubted the viability of such small deposits. Anyway fund houses earn only 10 to 20 basis points for managing these schemes. So, for really small amounts such as ₹ 100, one wonders whether it will be a viable option for the mutual fund house," said a debt fund manager. In numbers, it means that for managing ₹ 500 crore for an entire year, a fund house earns barely ₹ 50 lakh to ₹ 1 crore.

The assets under liquid funds fell by ₹ 45,300 crore or 21 per cent to ₹ 1.29 lakh crore in July. The category witnessed largescale redemption following the recent liquiditytightening measures by RBI (Reserve Bank of India) to strengthen the rupee. The category (represented by CRISIL – Amfi Liquid Fund Performance Index), gave 0.37 per cent returns in the month," said a CRISIL report. After RBI announced tightening of liquidity, returns from liquid funds turned negative for a couple of days in July.

In the past, Reliance MF introduced micro systematic investment plan in equity funds where investors could put in ₹ 100 per month. Even ICICI Prudential Mutual Fund had started a micro plan for ₹ 50 per month. These schemes were targeted towards weaker sections or smaller town. But they have not done too well for the fund houses due to market conditions.