Now, mutual fund SIPs must have a fixed end date, thanks to this new rule
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).
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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