The Securities and Exchange Board of India (SEBI) has made a big change in the rules for mutual fund investors. Now investors will be able to close their Systematic Investment Plan (SIP) or stop its installment just three days before the payment date.
After receiving the application, the mutual fund company will have to complete this process within two days (T+2). This will help investors avoid penalties and other financial troubles. The new rule has been implemented.
Earlier, this was the process
Earlier, investors had to apply 10 working days in advance to cancel SIP. It was difficult to correctly estimate the status of the bank account in such a long time, due to which the installment often bounced. Due to this, investors had to pay additional charges like ECS or mandate return charges. SEBI has simplified the cancellation process to solve this problem. The new rule will apply to both online and offline SIPs.
Think of the new process as
Suppose an investor’s SIP installment is on the 10th of every month. In some month, there is not enough money in his account till the 7th. In such a situation, he can request to stop or close the SIP on the 7th. The mutual fund company has to cancel it before the 10th. In the meantime, no penalty will be imposed on the investor.
Instructions to mutual fund companies
1. Companies will now have to cancel auto-debit or ECS instructions within two working days.
2. The investor needs to be informed in case of missing the SIP installment for the first time.
3. The investor must be informed that if he misses paying the installment for three consecutive times then the SIP will be stopped completely.
4. Information regarding cancellation of SIP will have to be given to the investor by sending a message.
5. SIP cancellation option must be made available on all platforms.
Big relief for investors
This decision of SEBI is being considered a big step towards transparency in the mutual fund industry and strengthening the rights of investors. Experts say that this new rule will be a big benefit for SIP investors. Now they will not have to fear fines and they will be able to have better control over their investments. This step will not only increase the convenience of investors but will also help them in financial planning.
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