From October 1 Perpetual SIPs Will Be Discontinued

The Indian stock market is abuzz with excitement, and the bulls are on a winning streak. For the sixth consecutive day, the Nifty has shown remarkable gains, starting the day on a strong note. The index has surged past the significant milestone of 19,900 points, bringing it tantalizingly close to it’s all-time high of 19,991.85, a record set back in July of this year.

But amidst this stock market frenzy, there’s another noteworthy development taking place in the background – one that holds crucial implications for SIP (Systematic Investment Plan) investors. This announcement revolves around the National Automated Clearing House (NACH), and SIP investors must pay heed to this update. According to a recent circular, NACH mandates will now come with a maximum validity period of 30 years.

In essence, the mandate management system streamlines the acceptance, digitization, processing, and transmission of mandates across various banks. It facilitates customer requests for periodic debits based on specified amounts through NACH.

In its circular, NACH stated, “A validation mechanism will be integrated into the central system, allowing only mandates with a duration of 30 years or less to be accepted.” These mandates essentially authorize banks to automatically debit the SIP amount toward a specific mutual fund. This adjustment aims to enhance the overall robustness of the system, as perceived by NACH.

As a result of this change, the ‘until cancelled’ option will no longer be available to investors. Instead, investors will be required to specify a definite end date for the mandate, and this end date cannot exceed 30 years from the date of issuance.

It’s important to note that this alteration won’t affect existing perpetual SIPs or any SIPs initiated before September 30, 2023. Since the circular’s effective date is October 1, 2023, these provisions are not relevant to SIPs that were already in place. NACH has also clarified that this adjustment applies to all forms of mandates, whether they are physical or electronic.

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In addition to these changes, it has been decided to discontinue the A001 (API Mandate) category code, which was a generic code serving no specific purpose. Going forward, all stakeholders are expected to use relevant category codes when presenting mandates, whether they are physical or electronic. This move is aimed at streamlining the process and ensuring clarity for all parties involved.

In conclusion, the Indian stock market continues to ride high, but SIP investors should be aware of the new NACH mandate validity rules, which are set to come into effect on October 1, 2023.

Disclaimer: This blog has been written exclusively for educational purposes. The securities mentioned are only examples and not recommendations. It is based on several secondary sources on the internet and is subject to changes. Please consult an expert before making related decisions.