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How to discontinue SIPs?

Updated on :  

08 min read.

A systematic investment plan (SIP) is an excellent way of investing in mutual funds. It allows you to invest small amounts on a monthly, quarterly, or yearly basis. Investing via SIP is the most popular mode of investing in mutual funds among young investors. It instils financial discipline by encouraging you to set aside a fixed sum regularly for your investments.

Why investors stop SIPs?

Many investors decide to stop their SIP and exit equity mutual funds when the stock markets fall, which is not a good move. You must continue SIPs despite a stock market crash as it helps you average out the purchase price of mutual fund units over time. Investing in equity mutual funds through SIPs with a long-term horizon will help you mitigate market risk and volatility to a great extent. However, many investors do not think this way, and they stop their ongoing SIPs when stock markets crash.

Stopping SIPs is not advisable if you want to attain your long term financial goals. However, if you still want to stop SIPs, the following are the steps:

Online SIP cancellation

  • You must first login to the mutual fund website using login credentials where your SIP is continuing. It helps if you have the folio number, bank account number associated with the folio and PAN handy for your login credentials.
  • You then select the ongoing SIP which you seek to cancel and click on ‘Cancel SIP’
  • It may take some time for your SIP to get cancelled. However, SIP deductions stop after the waiting period. 
  • Your mutual fund investments remain in the fund until you place a redemption or a switch request. 

You may cancel SIP even if you have invested through a mutual fund distributor. It helps if you inform your mutual fund agent who fills up the cancellation request for the SIP with the respective AMC. 

Cancelling ECS

If you have activated ECS for SIP payments, then you must inform your bank through which SIP payments are made to deactivate the ECS and then notify the mutual fund house. A SIP would be automatically terminated when the ECS payments are not made for a period of three months. 

  • Inform the mutual fund house and the bank from which the payments are made towards SIP.
  • Fill the relevant form issued by the asset management company (AMC). You have to mention the date from which you would like to discontinue the SIP.
  • Submit the form to the AMC. It may take up to 21 days to discontinue the SIP.
  • If you have submitted post-dated cheques for SIP payments, then unused cheques would have to be returned.

Pausing SIP

You may consider pausing SIPs if you have insufficient funds for your daily needs. However, it’s advisable to maintain at least three months worth of SIPs in your emergency fund to ensure the continuance of investment to attain long term financial goals. Moreover, experts recommend that you pause SIPs instead of cancelling them when you are short of funds. 

Follow these steps to pause your SIP:

  • You must log in to your investor account through the website of the AMC where you have invested in mutual funds through SIP. 
  • You then browse through SIP transactions where details of all your existing active SIPs with the fund house are mentioned. 
  • You will have to select the Pause SIP option and you could pause your SIPs for a minimum period of one month to a maximum period of six months. Some AMCs allow you to pause SIPs for a maximum of three months. 
  • You must fill the SIP pause form online where you must specify the time period for which you intend to pause SIPs. 
  • Your SIP will automatically start on expiry of the SIP pause period. 

Why pause SIPs in mutual funds?

If you miss your SIP ECS mandate then banks would levy a penalty. You may find this a burden as you don’t have sufficient funds to continue SIPs and you incur a fine. However, SIP pause facility helps as the AMC sends instructions to the bank asking them to pause SIP mandate for a certain period (It depends on the duration you have chosen) if you pause the SIP. 

Remember these points before pausing your SIP:

  • You must inform the AMC in advance if you intend to pause SIP. It is because the bank has been instructed based on the ECS mandate and it could take time to pause the mandate.
  • AMCs may allow you to pause SIP only for a certain period of time. It could range from three months to six months depending on the AMC.
  • AMCs could offer the SIP pause facility only once or twice for the duration of the SIP mandate depending on the AMC. 

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