New Rule: SEBI Sets Time-Cut for SIP Cancellations Process to 2 Days
SEBI has ordered that the process of SIP cancellation by its regulated entities should be within two working days only from December 1, 2024. It reduced the time period from the earlier 10 working days. Now the investors of mutual funds can cancel their Systematic Investment Plans (SIPs) in a short period of time.
In that process, it tries to ensure convenience and operational efficiency for mutual fund investors.
The updated rule applies uniformly across all Asset Management Companies (AMCs) for both online and offline SIPs. According to SEBI’s directive, mutual fund companies are now required to adhere to the T+2 timeline, ensuring cancellations are processed promptly and consistently.
Highlights of the New SIP Rules
1. Standardized Timeline Across AMCs
The two-day processing timeline is now applicable to all AMCs, thus bringing uniformity in whether the SIP was initiated online or offline. This will remove delays arising from different procedures across fund houses.
2. Easy Online Cancellation Facility
Investors can cancel SIPs through the websites of fund houses or third-party financial service providers. This makes it more accessible and convenient for investors to manage their portfolios.
3. Mandatory Reason for Cancellation
Investors are now mandated to select a reason from a predefined list while submitting cancellation requests. Such data collection is meant to enable the fund houses to understand investor behaviour and enhance their service.
4. Real-Time Communication
Investors will be updated about the status of cancellation requests through notifications. Therefore, this will be in the interest of the investor to be informed about all those processes.
The two-day timeline also ensures that electronic clearing service (ECS) debits are halted promptly, preventing bounce charges and easing potential financial strain. By implementing this reform, SEBI aims to promote transparency, reduce disputes, and modernize financial processes.
Deciding Between Pausing or Cancelling a SIP
Financial planners advise such investors to temporarily stop SIPs instead of cancelling them. The pause has the flexibility as the SIP will automatically get restored after the pause period expires. This avoids the irritation of re-registration. At the same time, they should be aware that most fund houses would limit SIP pause duration and frequency.
While offering complete control, it calls for re-registration in case the investor wishes to restart the investment. The frequency of cancellation of a SIP has no restriction. It can be cancelled any number of times.
Investors can find all information related to SIP pause and cancellation policy on the website of respective fund houses. It would help investors to make a decision in line with their requirements.
Through such investor-friendly reforms, SEBI is still keen on focusing on the efficiency and trust that should accompany the mutual fund ecosystem and empower the investor with easier and more flexible management of their investments.
