New SIP rule: SEBI mandates MF companies to process cancellations in 2 days

This revised timelines for cancellation of SIPs has come into effect from December 1, 2024

Mutual fund investors can now cancel their Systematic Investment Plans (SIPs) more quickly, as the Securities and Exchange Board of India (SEBI) has shortened the processing time to two working days from the previous 10 working days.

 

This revised timeline for cancellation of SIPs has come into effect from December 1, 2024. In a directive issued via a letter, SEBI mandated all mutual fund companies to implement this change for both online and offline SIPs.

 

“This change aims to standardise and expedite the cancellation process, which previously varied across fund houses, often causing delays. By enforcing a uniform T+2 timeline, SEBI ensures greater operational efficiency and empowers investors with faster control over their investments, enhancing convenience and flexibility in managing mutual fund portfolios,” said Jidesh Kumar, Managing Partner, King Stubb & Kasiva, Advocates and Attorneys.

 

Key features of the new rules

 

Uniform processing time: The most notable aspect of the revised rules is the uniformity in processing times. All AMCs are now required to adhere to the two-day timeframe for SIP cancellations, regardless of the mode through which the SIP was registered-- be it online or offline.

 

Online cancellation options: Investors can cancel their SIPs through various online platforms, including AMCs’ websites and third-party financial service providers. This flexibility allows investors to manage their investments more conveniently.

 

Mandatory reason for cancellation: When submitting a cancellation request, investors must select a reason from a predefined list. This requirement aims to gather data on why investors choose to exit their investments, which can help AMCs improve their services and offerings.

 

Communication of status: Investors will receive timely notifications regarding the status of their cancellation requests, ensuring they are kept informed throughout the process.

 

“SEBI’s T+2 timeline for SIP cancellations ensures ECS debits stop within two days, preventing bounce charges and easing financial strain. This investor-friendly reform offers flexibility to manage priorities, reallocate funds, or address constraints. It fosters trust, reduces delays, and promotes transparency in the mutual fund ecosystem. By driving operational efficiency among fund houses and banks, it minimises disputes and enhances confidence in investments. SEBI’s initiative reflects its commitment to protecting investor interests and modernizing financial processes,” Rahul Sundaram, Partner, IndiaLaw LLP.

 

Should you pause or cancel a SIP?

 

Experts suggest if you have short-term financial difficulty, you should pause SIP and restart again when financial conditions are normal rather than cancelling it.

 

Mutual fund houses may impose limits on how often and for how long you can pause a Systematic Investment Plan (SIP). Additionally, the pause facility might not be available for all SIP frequencies, such as monthly, quarterly, or annual SIPs, and these terms can differ between fund houses. Detailed information regarding SIP pause or cancellation policies can be found in the SIP pause/cancellation form available on the respective fund house websites.

 

Once the pause period ends, the SIP automatically resumes with the next instalment. However, if you cancel a SIP, you will need to register it again to continue. Notably, there are no restrictions on the number of times a SIP can be cancelled.