What happen if i miss or default my SIP installment

Systematic Investment Plan (SIP) is a regular and disciplined way of investing money in mutual funds. SIP allows you to invest predetermined amount at regular intervals (weekly, monthly, quarterly, etc). SIP helps the investor to inculcate the habit of saving and building wealth for the future.

As a investor, you have a mandate with your bank account through which your SIP amount automatically gets debits from your bank account and gets credited to mutual fund account in the form of units purchased on that day. Now the question arises what will happen if i miss one or few of my SIP installments? Here, i will discuss some of the questions which might help investor to get the answers.

What will happen to the amount which i have already invested?

The amount that has already been invested will continue to stay invested and you will continue to earn returns on it. You can withdraw the same amount in case you need the amount else it will continue to earn returns on it.

For example, you have a SIP of Rs 2000 per month and you have paid the amount for 15 months. It means that you have already invested Rs 30,000 in total. So if you default on next SIP, the 30k stays invested and keep earning you returns.

What will happen to the next SIP amount?

Nothing changes in case you have defaulted on one or couple of SIP installments. Your SIP is still active and next month SIP amount will be presented to your bank account for clearance. If you default for THREE consecutive months your SIP and ECS will stop. 

For example,  you have a SIP of Rs 2000 per month and you have paid the amount for 15 months. It means that you have already invested Rs 30,000 in total. Due to insufficient balance in your bank account, you have defaulted on your 16th and 17th SIP installment, which makes it two consecutive months. Now during the 18th month, you have sufficient amount in your bank amount, then Rs 2000 will be deducted from your bank account and not Rs 6,000 and your SIP will continue to run normally.

In case you have defaulted on your 18th installment also than your SIP will be rejected and ECS will stop.

What are the charges in case i default on my SIP installment?

There is no penalty levied by the mutual fund. This is SIP not EMI. Its your own money which you are investing and not the bank's money which you are repaying. However, you will incur bank charges for ECS rejection. These charges vary from bank to bank.

Will the folio be discontinued and i will lose my already invested money?

Your folio will remain active and you can invest in the same folio again in the future. No investor losses his/her already invested money.

Can i invest in future after defaulting on SIP installment?

Defaulting one or two SIP installments will not impact your current SIP. In case you default for THREE consecutive months your SIP and ECS will stop.

Even if the ECS is cancelled and SIP is stopped, you can always register for new SIP or can invest manually.

What can you do in case of job loss or in case of insufficient funds?

In case of financial crisis, you can always Pause or Stop SIP. It may take up to 30 days to process your request. Not all AMCs offer the ‘pause’ facility. It is best to check whether the option is available when registering the SIP;


Happy Investing!!!