This new mutual fund SIP mandate rule will kick in from October 1, 2023

The National Automated Clearing House (Nach) has that mutual fund SIPs can be set for a maximum duration of 30 years from the date of issuance. Also, the final collection date (end date) of mandate should be mandatory. Earlier, perpetual SIP had no end date. This will be effective from October 1, 2023. This is as per a circular issued by the National Automated Clearing House on August 18, 2023.

Investors should note that Perpetual SIPs that have already been established or those that were started before September 30, 2023, won't be impacted. These requirements do not apply to SIPs that already exist because the circular will come into effect on October 1, 2023. NACH, in its circular, has made it clear that "this is applicable for all forms (physical as well as electronic) of mandates.”

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It has been determined to put the following measures into effect in order to strengthen the process:

Maximum period for which a mandate can be issued

A mandate can be issued for a period of up to 30 years from the date of issuance. Validation will be embedded into the central system to accept only mandates with terms of 30 years or less.

Final collection date (end date) of mandate to be mandatory

It has been agreed to eliminate the option "until cancelled" for all categories of mandates; instead, the Final collection date (end date) will be required for all categories of mandates. The end date cannot be greater than 30 years from the date of the mandate, as stated in point 1 above.

What is a perpetual SIP?

According to the Franklin Templeton of India website, “Perpetual SIPs do not have any end dates. If you want to stop a perpetual SIP, you will have to fill an SIP closure form and submit it to your Asset Management Company (AMC). When you opt for perpetual SIPs, you do not need to renew your SIPs now and then. You can invest as long as you wish.”