Greeting To Our Readers!

SIP or Systematic Investment Plan, is a disciplined approach to invest regularly in mutual funds. It includes a series of consecutive payments of a predetermined amount on predefined dates either per month, per quarter, or year (as per the investor’s choice).

It is has become one of the most popular approaches to investing in mutual funds because it is easy to understand, easy to start, and easy to carry on as it requires a small amount to start investing. Recently I met some of my old friends, we had a long quality talk. In the midway of our conversation, we had topics like investment mutual funds and SIP to discuss on.

One of my friends, Prakash said that last year he started investing in the mutual fund via SIP. He further told that he was continuing his SIP very well each month, but last month he received his salary a bit late, due to which he missed his SIP installment last month. He said that his bank levied a kind of penalty charge for this. However, he was still unknown to other disadvantages of missing out on SIP installments.

Then I helped him understand what exactly happens when an investor misses out on his SIP installment!


What Happens When An Investor Miss His SIP Installment?

  • If an investor misses his SIP installment for a month then the fund house doesn't levy any penalty and cancels the SIP folio of that investor, but the bank charges the investor for Electronic Clearing Services (ECS) rejection.
  • Besides, if any investor misses out on paying one month's installment, they cannot buy more units next month at the same price prevalent in the previous month.
  • If the investor misses out on SIP installment for consecutive three months, the AMC will cancel the investor’s SIP and bank charges will be levied for not having enough cash for the ECS. Investors will have to initiate certain steps to continue their SIP in the same fund.


How To Prevent Missing A SIP?

I further explained to my friend that missing out on SIP installments can be a deterrent to achieving your financial goals. However, you can prevent missing your payments, only you need to follow the following:

  • Register your email address and phone number to get updates on your date of SIP installments. This way you will avoid the unnecessary penalties and charges imposed by your bank for having insufficient funds to get through the auto-debited transactions.
  • Choosing a SIP date closer to your salary date so that you don't face a cash crunch.


What To Do You When You Can’t Pay Next SIP Installment?

In case if you feel that you cannot pay your next SIP installment due to some emergency financial call in the family or some other financial needs, then you can avoid missing your SIP installment, what you need to do, just PAUSE YOUR SIP!!

Pausing means temporarily discontinuing the SIP to avoid discontinuation of the scheme. Under this option, you can pause the SIP for a period of 3 to 6 months, following which it will start operating as before.

Well, here one thing that you need to keep in mind that not every Asset Management Company provides the option of pausing SIP. So, before you invest in one, it is advised to research thoroughly.


What to Do, To Pause A SIP?

First Check whether your fund house avails the facility to pause a SIP, currently AMC’s such as ICICI Prudential Asset Management Ltd, Invesco India Asset Management Co. Ltd and Reliance Nippon Life Asset Management Co. Ltd allows you to pause your SIPs.

You can either write a letter to your AMC, asking to pause your SIP, for a certain period or fill a form, if your fund house has one. You need to give sufficient notice to your fund house.

Once you requested your AMC to pause your SIP, you need to wait for at least one month, as the mutual fund house needs time to send the ‘pause’ mandate to the bank, which takes time.


Keep reading our articles for more updates on finance and investment!!

For any kind of query you can contact us at Shri Ashutosh Securities Pvt Ltd., we are here to help you in any way possible.


Happy Investing!


(Mutual Fund investments are subject to market risk Illustrations are for example only, there is no guarantee of returns. Past performance is not an indicator/guarantee to future returns).