The Securities and Exchange Board of India (SEBI) has introduced a new rule to make closing a Systematic Investment Plan (SIP) faster and easier.
Earlier, it took 10 working days to cancel an SIP. However, with the new rule, this process will now take only 2 working days.
Investors can even submit a closure request 3 days before the SIP date. This updated rule applies to all mutual fund companies and has been effective since December 1, 2024.
How This Rule Benefits Investors
The earlier process often caused losses to investors when cancelling their SIPs.
For example, if the SIP installment was due on the 15th but there wasn’t enough money in the account on the 12th, the investor had to pay additional charges like ECS return or mandate return fees.
Now, with the new rule, investors can stop their SIP as late as 3 days before the installment date, helping them avoid these charges.
More Flexibility for Managing Finances
Previously, investors had to submit a cancellation request 10 days in advance, making it difficult to predict account balances. With the updated 3-day rule, investors have better control over their finances.
They can assess their account balance closer to the SIP date and decide whether to continue or cancel the SIP, avoiding unnecessary charges and financial stress.
Benefits for Investors
The new rule will help investors avoid losses when canceling their SIP.
Previously, if an investor had to cancel their SIP but didn’t have enough funds in their account by the SIP date, they would incur ECS return or mandate return charges.
Now, with the ability to request closure 3 days in advance, investors can check their account balance and avoid these charges.
For example, if the SIP date is the 15th and there isn’t enough money by the 12th, investors can cancel their SIP without paying extra fees.