Penalty for Missing SIP Payment: Nowadays, many people invest in mutual funds through SIP (Systematic Investment Plan). In this case, a fixed amount is automatically deducted from your bank account each month. But if there is ever less money in the account and the fixed amount is not deducted, then the bank charges a penalty for it.
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A case shared on Reddit
A Reddit user (complex_nutmeg69420) said that his father had to pay a penalty of Rs 590 to the bank. The SIP amount was deducted every month from his father's ICICI bank account. But one day, the server of his main bank was down, due to which money could not be transferred to the ICICI account, and the SIP amount could not be deducted. Due to this, the bank imposed a penalty. The user said that he has emailed ICICI Bank and requested to it waive the penalty.
Impact on small investors
Such cases can be very harmful for small investors. Many people do SIP of Rs 500 or even less every month, but if even one installment is not deducted, they have to pay a penalty of more than the amount.
Experts' opinion
According to a report published in the Economic Times, Sanjeev Govila, certified financial planner and CEO of Hum Fauji Initiatives, says that the penalty for payment failure is often more than the SIP amount, which can be heavy for small investors.
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Why do banks charge a penalty?
When you have activated the auto debit facility for any payment -- such as mutual fund SIP, insurance installment, or loan EMI -- the amount is automatically deducted from your bank account every month. This process happens through systems like NACH or NPCI's UPI Autopay. If there is not enough money in your account at that time, the payment fails, and banks charge you a penalty for 'failed auto debit'.