Fund houses have begun lining up mutual fund schemes focused on the government's newly proposed Rajiv Gandhi Equity Savings scheme (RGESS), which aims to attract first-time small investors into the capital market by offering them tax benefits.

Two state-owned fund houses --SBI and IDBI, as also one private fund house DSP Blackrock have filed draft offer documents for such schemes with the market regulator Sebi, while others may soon follow the suit.

Filing draft papers is mandatory before launching new schemes and the regulator usually takes about three-four weeks to clear these schemes.

"RGESS is likely to help improve penetration of mutual funds among the retail investors in the country. This scheme will not only create awareness, but it also has the potential to channelise retail money to capital markets in an informed manner," ICICI Prudential AMC MD and CEO Nimesh Shah said.

"The scheme is only for the first time investors in the capital market and there is a huge potential in the country. But only three fund houses have filed draft papers as without knowing the target audience they cannot go for the scheme and investors are required to have demat accounts, "Quantum Asset Management Company CEO Jimmy Patel said.

DSP BlackRock had filed the draft papers with Sebi within days of issuing guidelines by the regulator, while IDBI and SBI had submitted the draft details last week.

In order to encourage flow of savings in the financial instruments and improve the depth of the domestic capital market, Sebi last month announced the framework for Rajiv Gandhi Equity Savings Scheme.

Under the scheme, new investors can avail tax benefits who invest up to Rs 50,000 in the stock market and whose gross total annual income is less than or equal to Rs 10 lakh.