SEBI Mandates 2-Day Processing for Mutual Fund SIP Cancellations

Mutual fund investors can now cancel their Systematic Investment Plans (SIPs) faster, as the Securities and Exchange Board of India (SEBI) has reduced the processing time to two working days. This updated guideline, effective from December 1, 2024, replaces the earlier timeline of 10 working days.

Key Changes in SIP Cancellation

Uniform T+2 Timeline: All Asset Management Companies (AMCs) must now process SIP cancellation requests within two working days, irrespective of whether the SIP was registered online or offline. This move standardized timelines across the mutual fund industry, ensuring consistency.

Online Cancellation Options: Investors can cancel their SIPs through various online platforms, including AMC websites and third-party service providers. Offline cancellations remain an option, but digital channels offer more convenience for managing investments.

Mandatory Reason for Cancellation: When cancelling an SIP, investors must provide a reason from a predefined list. This requirement helps fund houses collect data on investor behaviour, which could lead to improvements in their offerings.

Real-Time Status Updates: Investors will receive timely notifications about their cancellation requests, making sure of transparency and keeping them informed throughout the process.

Operational Impact

The new T+2 timeline also impacts the cessation of auto-debit mandates. AMCs are required to ensure that auto-debit or ECS (Electronic Clearing System) instructions tied to the SIP are cancelled within the stipulated period, minimizing the risk of bounce charges for insufficient funds.

Pause vs. Cancel: What to Consider

If Investors face temporary financial constraints, pausing a SIP may be a better option than cancelling it. SIP pause options are available but come with restrictions, such as limits on duration and frequency, which vary by fund house. A cancelled SIP, on the other hand, requires re-registration to restart.

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.