Missing a SIP instalment in mutual fund investments is a common concern for many investors. While it may seem like a minor slip, understanding the implications of missing your SIP payment and related bank charges is essential to maintaining your long-term financial goals.
Here we will discuss what happens if you miss your SIP, the consequences, and whether banks charge bounce or penalty fees for such missed payments.
A Systematic Investment Plan (SIP) is a disciplined investment strategy where a fixed amount is automatically deducted from your bank account at regular intervals (usually monthly) to invest in mutual funds. SIPs allow investors to benefit from rupee cost averaging and the power of compounding, making it an effective tool for long-term wealth creation.
New to SIPs? Learn how to invest in a SIP.
Missing one SIP instalment does not immediately cancel your SIP or attract a penalty from the mutual fund company. Most mutual funds allow you to miss an SIP instalment occasionally without any financial or legal repercussions.
If you miss multiple consecutive SIP payments (usually two to three consecutive months), the mutual fund house may cancel your SIP mandate automatically. This means no further investments will be made unless you restart the SIP manually. A cancelled SIP disrupts the regular investment habit and delays your wealth-building goals. Some mutual funds may also levy processing fees for reactivating an SIP after suspension.
SIP works best when continuous regular investments are made, irrespective of market conditions. Missing payments means you lose the opportunity to invest when prices are low, affecting the rupee cost averaging strategy. This can potentially lead to a higher average purchase cost and reduced overall returns due to disrupted compounding over time.
Yes, banks do charge bounce charges for missed SIPs. Here’s why they charge these fees, and to explain it in a better manner, we have shared an illustration.
In mutual funds, investors usually set up SIPs (Systematic Investment Plans) through ECS (Electronic Clearing Service) or NACH (National Automated Clearing House). These systems enable banks to automatically deduct the SIP amount from the investor’s bank account on the scheduled date. If the account does not have sufficient balance, the debit request fails, which is termed a SIP “bounce.” In such cases, banks apply ECS/NACH return charges, often referred to as SIP bounce charges.
These charges vary—SBI imposes ₹250 per failed transaction, while ICICI Bank charges ₹500 plus GST (₹590).
If a SIP transaction fails, ICICI Bank imposes a penalty of ₹500 along with 18% GST, which amounts to ₹590. In the case of three such failed SIPs, the total charges add up to ₹1,770 (₹590 × 3).
For example, if three SIPs of ₹3,000 each bounce in ICICI Bank, the penalty is ₹1,770, about 59% of the SIP value. For smaller SIPs with an installment of ₹250 (also known as choti SIP), the penalty may exceed the SIP amount itself.
Note: The penalty percentage calculated on single amount of SIP installment (₹1,770/₹3,000)
These charges vary between banks, typically ranging from ₹250 to ₹2,000(Canara Bank on ₹1 crore and above) per failed transaction, plus applicable GST. Some banks charge even higher fees for repeated bounce cases.
Missing a SIP instalment is not the end of your investment journey, but it can disrupt your disciplined investing and compound returns. Mutual funds themselves do not penalise missed SIP payments, but banks may charge bounce fees when auto-debit transactions fail due to insufficient funds. Multiple missed payments can lead to suspension or cancellation of your SIP, delaying your long-term financial goals. To avoid these drawbacks, maintain sufficient balance, monitor your SIPs regularly.
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