SIP (Systematic Investment Plan) and NACH (National Automated Clearing House) are common methods used for making regular investments or payments, especially in mutual funds, loan repayments, insurance premiums, and more. When a payment through SIP or NACH fails or “bounces” due to insufficient funds or other reasons, bouncing charges may be levied. Here’s an explanation of SIP/NACH bouncing charges:
SIP Bouncing Charges
A Systematic Investment Plan (SIP) allows investors to invest a fixed amount regularly in a mutual fund scheme. The amount is automatically debited from the investor’s bank account on a specified date each month. If the SIP payment fails (bounces) due to insufficient funds, the following charges may apply:
- Bank Charges: The bank may levy a penalty on the investor’s account due to the failed transaction. These charges can vary depending on the bank’s policies.
- Mutual Fund House Penalty: Some mutual fund houses may also impose a small penalty or additional charges if the SIP payment fails. However, not all fund houses charge for this.
- Impact on SIP: Multiple bounces can lead to the cancellation of the SIP by the mutual fund house. Additionally, the investor may lose out on potential returns due to missed investments.
NACH Bouncing Charges
National Automated Clearing House (NACH) is a centralized system for facilitating interbank transactions, often used for auto-debit mandates like loan EMIs, insurance premiums, SIPs, etc. When a NACH payment fails, similar charges may be imposed:
- Bank Charges: Just like with SIPs, if a NACH transaction fails due to insufficient funds or any other reason, the bank may charge a penalty fee to the account holder.
- Service Provider Penalty: The entity to which the payment was supposed to go (e.g., loan provider, insurance company, or mutual fund) may also levy a penalty for the missed payment. This can also affect the service, such as missed EMIs impacting credit scores or insurance policies lapsing.
- Legal Consequences: Repeated failures in payments via NACH can lead to more severe actions, such as the service provider taking legal action, or reporting the issue to credit bureaus, affecting your credit score.
Typical Charges
- Bank bouncing charges typically range between ₹200 to ₹500 per transaction plus applicable GST, but this can vary based on the bank.
- Service providers may also levy additional charges, typically around ₹100 to ₹500 plus applicable GST depending on the nature of the payment and the service terms.
Consequences of SIP/NACH Bouncing
- Credit Score Impact: Especially in the case of loans or credit payments, bouncing can negatively affect your credit score.
- Service Disruption: For insurance premiums or other regular payments, repeated bounces can lead to the cancellation of services.
It’s essential to maintain sufficient balance in your bank account on the due date of the SIP/NACH payment to avoid these charges and ensure that your investments or payments continue smoothly.
