The bank also might put a penalty for failure of auto debit payment.
The stockholder doesn’t put any penalty but if you fail to pay it for consecutive four months, your chosen SIP plan will automatically be cancelled.
SIP or Systematic Investment Plan is a method of investing money in a mutual fund, where the investor chooses a scheme and invests a fixed amount of their choice regularly. It is a popular choice among investors due to its flexibility and potential for good returns.
However, it is crucial to have sufficient funds in your bank account to ensure timely payment. When you opt for SIP, the stockbroker sends a request to the bank, and the amount is automatically debited from your account as per your authorization.
But what happens if you fail to pay the SIP on time? Let’s explore the consequences. Typically, missing a single SIP payment in a month does not incur any penalty. However, if you fail to make payments for four consecutive months, your chosen SIP plan will be automatically cancelled. This change was implemented as per the revised policy, extending the cancellation tenure from three to four months.
Cancellation of your SIP means you will no longer be able to invest further in your chosen plan. However, upon maturity, you can withdraw the invested amount, albeit with the possibility of receiving lower returns compared to your original plan.
To avoid SIP cancellation, it is advisable to maintain sufficient funds in your bank account. Failing to do so may result in penalties imposed by the bank for auto-debit payment failure.
It is recommended to closely monitor your bank account and promptly inform the mutual fund company about any financial issues at least 30 days in advance. You can request a temporary pause or cancellation of the SIP plan, and many companies offer this option. Once your financial situation improves, you can resume or modify your chosen SIP, adjusting the payment amount, date, or frequency according to your needs.
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