Mutual Fund SIP: What happens when you miss a monthly contribution? (2024)

A Systematic Investment Plan (SIP), commonly referred to as SIP, is a payment feature provided by mutual fund companies that allow investors to contribute a certain amount to the mutual fund scheme of their choice on a monthly basis at predetermined intervals. Investors must authorize Electronic Clearance Service (ECS) and National Automated Clearing House (NACH) with the bank in order to have the chosen SIP amount automatically debited from their bank accounts. There can be a time when you miss your SIP for a month and are uncertain about the implications. As a consequence of this, if a SIP is missed, the Asset Management Company (AMC) does not impose a penalty; instead, it prompts the bank to complete the payment. If, however, you do not have enough money in your account, your bank may impose a penalty for failing to maintain sufficient money in your account, taking into account dishonored auto-debit payments/cheque. If you are extremely inconsistent with your SIP payments, your SIP will be automatically cancelled if you miss 3 straight installments.

When does one miss a mutual fund SIP?

Mr Subodh Hungund, COO, Epsilon Money said “Missing Mutual Fund SIP usually happens when an investor is not able to maintain the minimum required balance in his/her bank account. And in case of SIP is missed for 3 consecutive months, then SIP will be automatically cancelled. However, missing SIP would not lead to any penalty or action from AMC, but the bank may charge a penalty to the investor for defaults on SIP payments. In order to avoid such a scenario, the investor can pause the SIP for a particular month or for a particular period and then resume when he/she is comfortable to commence the same."

What happens when you miss your mutual fund SIP?

Mr Subodh Hungund said “SIP or Systematic Investment Plan allows regular investing into Mutual Funds. While such regular investments achieve short-term/long-term goals of investors, there are situations where investors can miss SIP. Missing Mutual Fund SIP usually happens when an investor is not able to maintain the minimum required balance in his/her bank account. Though The mutual fund or AMC to whose mutual fund scheme the investor has subscribed to shall not charge any penalty or initiate any action for non-payment of Mutual fund SIP, Banks may charge a penalty for defaults on payments and in case the SIP is missed on a continuous basis for 3 consecutive months, then the SIP is automatically cancelled."

How to prevent missing your mutual fund SIP?

Mr Subodh Hungund said “In order to avoid such a scenario when an investor feels that he/she is not able to pay mutual fund SIP in future then it is better to stop it. Stopping the SIP doesn't mean its withdrawal and investments made so far through SIP into the mutual fund scheme shall continue to remain invested and earn returns. Also, there is an option of pausing the SIP for a period and later the same SIP can be continued with no charges by either the AMC or Bank. For placing the SIP stop /pause request, you need to approach your Distributor or AMC either online or offline and place a - SIP Stop Request - at least 30 days in advance."

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ABOUT THE AUTHOR

Vipul Das

Vipul Das is a Digital Business Content Producer at Livemint. He previously worked for Goodreturns.in (OneIndia News) and has over 5 years of expertise in the finance and business sector. Stocks, mutual funds, personal finance, tax, and banking are among his specialties, and he is a professional in industry research and business reporting. He received his bachelor's degree from Dr. CV Raman University and also have completed Diploma in Journalism and Mass Communication (DJMC).