SEBI Reduces SIP Cancellation Time to 2 Days – Investors Should Know

SEBI Reduces SIP Cancellation Time to 2 Days – What Investors Should Know

Mutual fund investors can now cancel their Systematic Investment Plans (SIPs) more efficiently. The Securities and Exchange Board of India (SEBI) has reduced the processing time for SIP cancellations to two working days (T+2) from the previous 10 working days, effective December 1, 2024.

Key Highlights of the New SIP Cancellation Rules:

• Uniform Processing Time:
  All Asset Management Companies (AMCs) must process SIP cancellations within two working days, regardless of whether the cancellation is initiated online or offline.
• Enhanced Online Cancellation Options:
  Investors can cancel SIPs using AMC websites or third-party platforms, providing flexibility and convenience for managing investments.
• Mandatory Cancellation Reasons:
  Investors must select a reason for cancellation from a predefined list, enabling AMCs to analyze trends and improve services.

• Status Updates:
  Regular notifications are sent to investors about the status of their cancellation requests, ensuring transparency and clear communication.

READ MORE: SIP Return Calculator – How to Calculate Your SIP Returns with Step-Up SIP & Types

Benefits of the T+2 Timeline:

• Prevention of ECS Bounce Charges:
  SIP cancellations within two days help stop electronic clearing service (ECS) debits promptly, avoiding unnecessary charges.
• Operational Efficiency:
  Uniform timelines reduce delays and disputes, building investor trust in mutual fund systems.
• Increased Flexibility:
  Investors gain more control over reallocating funds or managing financial constraints with faster SIP cancellations.

Expert Opinions:

• Rahul Sundaram, Partner at IndiaLaw LLP, praised SEBI’s initiative, highlighting its role in minimizing disputes, enhancing confidence, and modernizing financial processes.
• Jidesh Kumar, Managing Partner at King Stubb & Kasiva, emphasized that the T+2 timeline fosters investor empowerment and boosts operational efficiency.

Pause vs. Cancel: What Should You Do?

• Pause SIPs for Short-Term Financial Strain:
  Experts recommend pausing SIPs if facing temporary financial difficulties rather than canceling them outright.
• Cancellation Policies:
  • No restrictions exist on the number of times an investor can cancel SIPs.
  • SIP cancellations require re-registration to continue.
  • Pause facilities may vary by frequency (monthly, quarterly) and between fund houses.

• Automatic Resumption Post Pause:
  Once a pause period ends, the SIP resumes automatically. For precise details, refer to the SIP cancellation/pausing forms available on respective fund house websites.

This move by SEBI demonstrates a strong commitment to protecting investor interests while modernizing and simplifying financial processes in the mutual fund industry.

READ MORE: 20 Factors to Consider Before Investing in Mutual Funds

Disclaimer: This blog is solely for educational purposes. The securities/investments quoted / information here are not recommendation.