SIP works by investing a fixed amount at a defined frequency. With this an investor does not need to time the market and can invest in a hassle-free manner. Have you ever thought of a situation when you miss a mutual fund SIP instalment ?
Usually, an investor will sign a mandate (auto-debit mandate) for automatic deduction of the money from their bank accounts to the mutual fund folios. This is happening through Electronic Clearing Service (ECS).
Most investors think that missing an SIP can lead to serious consequences like penalty, cancellation of future SIPs etc. What happens if you don’t have sufficient balance in your bank account ?
Don’t worry! mutual fund companies won’t charge any money or deduct any hidden fees for missing your instalments. However, your bank can charge certain fees as a penalty for the insufficient balance and missing the auto-debit payments.
ECS rejection charges may vary from bank to bank. Charges can be somewhere between 150 INR to 750 INR for most of the banks.
What happens to your investment when you miss a SIP instalment?
Missing one SIP instalment should not create any problem for the investor. A missed SIP instalment happens when there isn’t sufficient balance in the account. No other situations can lead to penalty charges in SIP instalments.
Three consecutive instalment failures can lead to SIP cancellation at the AMC (Asset Management Companies). Investors can always reach out AMC to activate the SIP again in this situation. The existing investments will continue to be invested and earn returns.
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it is advisable to pause an SIP when an investor is not in a situation to continue the SIP for a period longer than 2 months. This will not attract any penalty charges.
Investor can resume their SIPs by keeping sufficient balance in their bank account. Pausing and resuming an SIP does not require any additional charge by the AMC or the Bank.
If you are invested in regular plans through a mutual fund distributor, please contact them for further assistance. Direct plan investors can write to their respective fund houses for resuming services.
