A Guide to Monthly Income Plans in India

You have got yourself a job that is paying you well. Now you are looking for parking your hard earned money into a safe venture. You aren’t up for some great risk and don’t mind even if the returns aren’t that great.

Have you heard of Monthly Income Plan (MIPs)?

MIP is more of a debt oriented mutual fund that provides you with a monthly income, where the income is more in a form of dividends. The major investment is made in debt instruments like corporate bonds, debentures, government securities to name a few. MIP with dividend and MIP with growth are the two options this feature is available in, quite like mutual funds.

Let us put light on some of the features of this scheme.

Dividends can be declared only from the  profits and not from Capital: Like for instance if the NAV initially was Rs 10 and post a month rose to Rs 10.2 than the dividend is given out of the soared 0.2 and not the initial capital amount invested.

Regular Income isn’t guaranteed: It is a myth that MIPs provide you with assured monthly income. The major role of them is to declare dividends but there may be situations when dividends aren’t declared owing to bad performance.

Interest rates and stock market influence MIPs return: MIPs aren’t safe just because they are debt related products. The market fluctuation does affect the returns yield by them under extreme scenario.

MIPs are prone to mis-selling because of a high commission structure: The commission earned by agents is as much as 1 to 1.5% opposed to 0.5 to 1.5% in Equity funds. This many times leads to the mis-selling of MIPs as a safe bet to park money, which sounds to be good for many Indians.


These pointers should help you take a better call while choosing the right MIP offered by many financial institutions in India.