SIPs or Systematic Investment Plans are the most common means to invest in mutual funds. For determining if an investment fits your goals or for creating an investing discipline, they can help for both.
You can invest a fixed amount at regular intervals, usually monthly, and over time you benefit from buying between lowest and average per unit – rupee cost averaging. But what happens when a payment slips through the cracks?
The good news is that your investment does not vanish nor does your SIP automatically get cancelled after a single missed payment. However, there are a few things you should be aware of to rectify this.
This article walks you through everything: what actually happens when you miss a SIP payment, how to pay a missed instalment, whether you can restart your SIP, and what penalties, if any, you might face.
What happens if you miss out on your SIP instalment?
Missed SIP can be due to various factors – insufficient balance, technical errors, wrong IFSC code of the account or inactive mandates. The bank will attempt to debit the amount on the scheduled date, and when it cannot, it will return the transaction. It is known as an ECS (Electronic Clearing Service) or NACH (National Automated Clearing House) mandate failure.
The following happens :
- The mutual fund house is notified that the instalment was not collected.
- No units are purchased for that particular month, which means you miss out on buying units at that month’s NAV (Net Asset Value).
- Your existing invested units remain completely safe. Nothing is removed from your portfolio.
- Your SIP continues as normal for the following month, provided your account has adequate funds.
Most asset management companies (AMCs) allow a certain number of consecutive missed payments – typically two or three – before they pause or cancel your SIP. So a single missed month is unlikely to cause your SIP to be stopped. However, repeated missed payments over consecutive months will likely result in the SIP being put on hold or cancelled altogether.
It is also worth noting that your bank may charge a dishonour fee or ECS return charge for a failed debit attempt. This is a charge levied by your bank, not the mutual fund company, so it is separate from any mutual fund-related consequences. Most major banks publish their ECS return charge schedules on their websites. These may vary from Rs 150 to Rs 750 per transaction and will be different for loan EMI failure. Thus, you stand to lose at both ends.
Steps on how to pay your missed SIP instalment
If you’ve missed a SIP instalment and want to make up for it, the most straightforward approach is to make a lump sum investment for the missed amount. Here is how you can go about it:
- Log in to your mutual fund account or the platform through which you manage your SIP, such as your AMC’s website, a distributor portal, or an investment app like MF Central or CAMS Online.
- Navigate to the relevant fund in your portfolio and select the option to make an additional purchase or lump sum investment.
- Enter the amount equivalent to your missed SIP instalment (or more, if you choose).
- Complete the transaction using net banking, UPI, or any other available payment method.
- The units will be allotted based on the NAV of the day your transaction is processed, not the original SIP date. Do keep in mind that you cannot go back and purchase units at the NAV from the date you missed. The price you get will be the current NAV, which may be higher or lower than what you would have paid on the original SIP date. This is one reason why consistent investing matters – timing cannot always be replicated.
A missed payment due to an insufficient balance can be solved by making sure your account is topped up before the next SIP debit date. Some platforms also allow you to reschedule your SIP date, which might be helpful if your salary credit date and SIP date are misaligned. You can also update or register a fresh NACH mandate through your bank or fund house if the existing one has lapsed.
Can you restart your SIP Investment after Missed payment
Yes. Missing one or even a few SIP instalments does not mean your investment journey is over. A paused or cancelled SIP due to repeated missed payments have the option to start a fresh SIP in the same fund. SEBI regulations do not mandate any waiting period before restarting a SIP.
Here’s what you should know about restarting:
- If your SIP was merely paused (not cancelled), some AMCs allow you to resume it by updating your bank mandate or ensuring your account has sufficient funds for the next debit.
- If your SIP was cancelled, you will need to register a new SIP. This is usually a straightforward process through your AMC’s website or app.
- You can choose to keep the same SIP amount, or you might consider increasing it to make up for the missed months over time.
- Your existing investment in the fund is not affected by this process. Units you already hold remain in your portfolio.
Some investors worry that restarting a SIP means losing the continuity of their investment. While it is true that a fresh SIP is technically a new plan, the underlying holdings in the fund remain the same. A pause should not become a stoppage of investing habit.
A missed payment owing to change in financial situation should be monitored and SIP amount and date can be changed. Most platforms allow you to reduce the instalment amount, which can help you maintain the habit of regular investing even during tighter months. Various calculators offers guidance on adjusting SIPs based on your financial goals.
Penalties for missed SIP Payments
The main concern is of continuity of investments and it is easily resolved. Mutual fund companies themselves do not charge a penalty for missed SIP payments. Your fund house will not fine you or penalise your account simply because an instalment failed.
However, there are a few charges you might encounter:
Bank charges: When a SIP debit fails due to insufficient funds, your bank may raise a dishonour or ECS return charge. This typically ranges from ₹100 to ₹750 depending on your bank, and it is deducted from your bank account, not from your mutual fund portfolio. The Reserve Bank of India (RBI) has issued guidelines governing these charges.
Missed compounding opportunity: While not a financial penalty in the traditional sense, missing instalments does mean you miss out on units purchased at that month’s NAV. Over the long run, this can have a small but noticeable impact on your overall returns, particularly in a rising market. You can use the SIP calculator to understand how even one missed month affects long-term outcomes.
SIP cancellation: If you miss three consecutive instalments (the threshold varies by AMC), your SIP may be cancelled. Restarting it requires registering a new SIP, which is a minor inconvenience but not a financial penalty. You can check your specific fund house’s policy –each fund house publishes its SIP cancellation policies online.
Effect on Credit Score: a continuous stream of missed SIPs can be viewed as a missed loan payment and can affect your credit score. Its best to cancel the earlier ECS mandate and start afresh.
In summary, the consequences of missing a SIP payment are manageable. The most significant impact is the missed opportunity to invest at a particular NAV and the possible bank charge for a failed transaction. Neither of these should discourage you from restarting or continuing your investment.
Conclusion
Missing a SIP instalment is not the end of your investment plan. Your existing mutual fund units remain intact, your portfolio is not penalised by the AMC, and you have clear options to either make up for the missed payment or simply carry on with your next instalment.
The most important thing is not to let a missed payment lead to a longer break from investing. The real power of a SIP comes from consistency over time. If you do miss an instalment, check whether your bank has charged a return fee, consider making a lump sum investment for the missed amount, and ensure your account has enough balance ahead of the next SIP date.
If your SIP has been cancelled due to multiple missed payments, restart it as soon as you can. A fresh start is always better than giving up entirely. Investing, like most worthwhile habits, is most effective when maintained steadily – even if there is the occasional stumble along the way.
FAQ’s
Not immediately. Most mutual fund companies allow two to three consecutive missed payments before pausing or cancelling a SIP, as per AMFI guidelines. A single missed instalment typically does not result in cancellation, and your existing units remain safe in your portfolio.
Mutual fund houses do not charge a penalty for missed SIP instalments. However, your bank may levy a dishonour or ECS return charge for a failed debit, which can range from ₹100 to ₹7500. The only other ‘cost’ is the opportunity cost of not purchasing units at that month’s NAV.
Also, repeated missed SIPs will start affecting your credit score over a period of time.
You cannot pay at the original NAV once the SIP date has passed. However, you can make a lump sum investment in the same fund for the equivalent amount. Units will be allotted at the NAV applicable on the date of your new transaction.
If you skip one month, no units are purchased for that period and you miss out on the NAV of that date. Your SIP will not be cancelled for a single missed payment in most cases, and it will resume automatically the following month, provided your bank account has sufficient funds.
