Tue. Apr 16th, 2024

All mutual fund Systematic Investment Plans (SIPs) must now have a fixed end date, with the said rule having come into effect on October 1, as mandated by the National Automated Clearing House (NACH).

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The circular to this effect was issued by NACH on August 18. Operated by the National Payments Corporation of India (NPCI), NACH is a centralised electronic payments system that facilitates high-volume and low-value interbank transactions; it is also used by mutual fund houses to collect SIP payments from the investor bank accounts.

What are perpetual SIPs?

These are SIPs without a fixed end date and are typically used by long-term investors who want to build wealth over time.

What changed from October 1?

Maximum period for mandate: Now, SIPs can be authorised for up to 30 years from the date of issuance. NACH, the centralised system, will exclusively accept mandates with a duration of 30 years or less.

Mandatory end of mandate: The option ‘until cancelled’ is being eliminated for all categories of mandates and replaced by a final collection date (end date) which cannot be exceed 30 years from the date of issue of the mandate.

What about pre October 1 SIPs?

These will remain unaffected. This is because the rule is applicable only from the aforementioned date.

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