Sometimes it happens with lakhs of investors investing in mutual funds through SIP that the installment is not deducted on time due to lack of sufficient balance in the bank account or technical reasons. In such cases, the Asset Management Company (AMC) usually does not impose any penalty. Only the investment for that month is not made and the related fund units are not purchased.
Failure of one SIP installment does not affect the amount already invested. The units you hold remain in the fund and keep giving returns as per the market performance. If sufficient funds are available in the account in the next month then the SIP resumes as normal.
Although mutual fund houses generally do not levy any penalty, the bank may charge a fee in case of ECS or NACH bounce. This charge may vary as per the rules of the bank. Therefore, it is important to maintain sufficient balance in the account before the SIP date. Missing one or two installments is not a big problem, but if several consecutive installments fail, the SIP may become inoperative. Most fund houses can cancel or close the SIP if three consecutive installments fail. In such a situation, the investor may have to start SIP again.
Financial experts believe that investors should maintain sufficient funds in their bank accounts and keep SMS and email alerts active. Regular investment in SIP only gives the benefit of compounding in the long run. Repeatedly missing installments can delay achieving financial goals.
