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The lack of a mutual fund (MF) SIP usually occurs when an investor is unable to maintain the required minimum amount in their bank account. Here’s what they should do in such an event.
A Systematic Investment Plan, commonly referred to as a SIP, allows individuals to regularly invest a small amount in a preferred mutual fund. Sometimes investors may be unable to make SIP payments while in office. Such situations can arise in the event of financial problems, loss of employment or uncertainty of the income of the investor.
Here’s what happens if investors are unable to pursue SIP payments.
The good news
The good news is that mutual fund companies do not penalize non-payment of SIP installments. It can, however, be automatically canceled if investors fail to make payments for three consecutive months.
Do the banks penalize in this scenario?
Yes. Banks can penalize investors for dishonoring direct debit payments.
In some cases, if the investor defaults on a SIP, the bank may charge a fee for “not maintaining a sufficient balance” for direct debit mandates via ECS (electronic clearing service). Banks have their set of fees for rejecting ECS.”
What should investors do?
Experts advise investors to suspend the SIP by sending a request in advance to the fund house in case of financial problems. They can start later when they are financially comfortable.
To take a break, investors must log into their accounts through the AMC website where they invested in mutual funds through SIP. Next, they must browse SIP transactions, select the “Pause SIP” option, and suspend SIPs for a minimum period of one month to a maximum of six months.
Some AMCs allow investors to only suspend SIPs for a maximum of three months.
The SIP will start automatically when the SIP pause period expires.
This feature is useful because the AMC also sends instructions to the bank, asking it to suspend the SIP mandate for a certain period.
(Edited by : Shoma Bhattacharjee)
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