Systematic investment plans in mutual funds are a time-tested mode of investing suited for building wealth over the long term. While there are immense benefits to mutual fund SIP, there could emerge scenarios where the investor has to discontinue the payment of these regular installments. The disruption could be temporary or permanent based on the individual situation. Let us discuss how to go about the process systematically.
How to temporarily cancel/pause SIP
There are different ways to do this:
- Some mutual fund companies have a provision where the investor can seek the suspension of regular payments for a short duration, say, for a few months. In that case, the bank needs to be informed, and the standing instructions are canceled. Bank charges will be applicable.
- The investor could provide Stop Payment instructions to the bank to suspend the remittance of the SIP installment. Banks usually charge for this service.
- The investor can deliberately keep the balance in the bank account short of the installment amount. However, this is a double whammy as it would also affect the investor’s credit rating besides incurring bank charges.
Generally, when three consecutive installments of the SIP remain unpaid, the SIP is automatically canceled.
How to cancel SIP offline
The investor has the discretion to cancel the SIP at any time. The mutual fund would have invested the installments paid in revenue-generating instruments. The investor would also have a certificate detailing the number of shares/units held in that mutual fund.
The investor can redeem this certificate by presenting it to the mutual fund company along with a redemption request letter. Based on this letter, the mutual fund company will evaluate the amount due to the investor. If the investment has appreciated, the fund house will calculate the value, including accruals by way of dividends and capital gains.
The company will monitor the investments and their market value and calculate the Net Asset Value (NAV). Depending on the NAV on the date of redemption, the company calculates the amount due, deducts charges if any, and credits the balance amount to the investor’s bank account. The investor will have to inform the bank, in writing, specifying the date from when this SIP is being discontinued.
Generally, there will not be any charges or penalties for this. Penalties could arise if the SIP was for a time-specific scheme with a mandated minimum investment period. The penalty situation is applicable for tax-saving mutual fund schemes that provide for tax exemption.
How to cancel SIP online
To cancel a mutual fund SIP online, the investor will need to access the fund house’s website and click on the specific scheme in which he/she is a member. There will be a link for the cancellation of the SIP. The link will verify the investor’s details and credentials and accept the cancellation request. Usually, it may take up to three weeks to complete the formalities, and the money will be credited to the investor’s bank account.
Cancellation requests online can be of two types:
- Cancellation with KRAs
- Cancellation with AMCs
How to cancel on KRAs
KRA refers to the KYC Registration Agency. CAMS KRA and NSDL KRA are examples. KYC, as we all know, stands for “Know Your Customer.”
The KRA stores the KYC details in digital format. The customer submits these details using the KYC Registration form and provides copies of the supporting documents.
You can initiate your SIP cancellation request on the websites of any of these KRAs and follow the steps as mentioned.
How to cancel on AMCs
AMCs are asset management companies. When an investor wants to opt out of a mutual fund scheme, he/she can do it in two ways: offline or online. For online, the investor needs to log on to the AMC’s website, provide the details, and request for cancellation of your SIP.
The bottom line
Every mutual fund will have a different process for the cancellation of SIPs. However, these processes are hassle-free and usually free of charge.
Conclusion
Opening an SIP with a mutual fund involves several steps, such as completing KYC and verifying investor credentials. Thankfully, cancellation of a mutual fund SIP is a much simpler process involving fewer steps, especially if you choose the online mode.
FAQs
Why would someone want to cancel their mutual fund SIP?
There could be several reasons for this:
– The investor might have achieved the target amount and does not need to continue with the SIP.
– The particular mutual fund scheme may have been underperforming.
– Unforeseen personal circumstances would have triggered the decision.
– The investor might have found a better investment product.
– The scheme might have fulfilled its designated purpose. For example, the tax-saving scheme would have completed its stipulated period.
Will the mutual fund company levy any charges for canceling an SIP?
Generally, mutual fund companies do not levy charges for these cancellations.
Will the investor’s bank levy any charges for canceling an SIP?
The banks do charge for termination of standing instructions. In case of insufficient funds to carry out the standing instructions, the bank will levy a penalty.
How do I cancel my MF SIP online?
To cancel your Mutual Fund SIP online, log in to your mutual fund account, locate the SIP you want to cancel, and select the “Cancel SIP” option. The SIP will be discontinued within 30 days.
Can I cancel my SIP anytime?
Yes, you can cancel your SIP anytime. Most mutual funds allow investors to stop or cancel their SIPs with a written request or through their online account.
Can we cancel mutual fund SIP?
Yes, mutual fund SIPs can be canceled. You can do so through the fund house’s website, submitting a written request, or by visiting an AMC branch office or RTA office. Cancellation typically takes effect within 30 days.
What will happen if I cancel my SIP?
If you cancel your SIP, future purchases in the mutual fund scheme will stop, and no auto-debit occurs. Existing units remain unaffected, but your contributions cease.
