What happens if there is no money in the account on the date of SIP? Know the rules, penalties and impact on investment.

If SIP fails due to lack of balance in the bank account, the bank can charge a penalty of ₹150–₹500. If this happens repeatedly, the mutual fund company can stop the SIP. This breaks the continuity of investment, stops compounding and affects long term financial goals.

When you start SIP in mutual fund, you choose a fixed date on which every month a fixed amount is automatically deducted from your bank account and invested. This is an easy and effective way of regular investment. But what will happen if there is no money in your account on that date? That month's SIP will not be deducted, meaning your money will not be invested. Along with this, the bank can also charge you for that failed transaction.

If this happens repeatedly, the mutual fund company can also stop your SIP. Therefore, it is important that you write the money in your bank account on the date of SIP debit, so that your investment continues smoothly every month and there is no problem. Let us now know how much penalty will be charged if SIP fails due to lack of money in the bank. What is SEBI's rule regarding this and will it also affect the credit score?

SIP payment failure?

When the bank tried to make the payment and there was no money in the account, the transaction 'failed'. This is called a missed installment of SIP.

How much penalty do banks charge?

If you have registered ECS/NACH (Electronic Clearing System / National Automated Clearing House) for SIP and the fund debit fails, the bank can charge a 'bounce charge'. As per the bank's rules, it can usually range from ₹150 to ₹500.

What do SEBI rules say?

SEBI says that if some installments are missed in SIP, then AMC (Asset Management Company) can automatically stop the investor's SIP. If 3 to 5 installments fail continuously. This limit can be different for every fund house.

Will it affect the credit score?

Since SIP is not a credit product, if only SIP fails, then the credit score is not affected. But if the bank repeatedly sends information about ECS failure to CIBIL, then there can be an indirect effect.

How will missing a SIP affect your long term financial goals?

The biggest advantage of SIP is - the benefit of regular investment and compounding increases with time. But if SIP fails repeatedly, then the continuity of your investment is broken. This has two major disadvantages - first, the target amount you had set for your long term goal (such as retirement, children's education, buying a house) will not be achieved on time. And secondly, the compounding effect that makes SIP beneficial is weakened due to interruption. That is, a small mistake can slow down your entire financial roadmap.