SIP registrations will now take less time as fund houses will migrate to National Automated Clearing House (NACH) system for SIP registrations from March 1.
NACH is an online centralised system which helps fund houses register SIP mandates swiftly. It is a funds clearing platform set up by NPCI (National Payments Corporation of India) in order to make investing simple for investors. The concept is relatively new to India, having become operational in December 2012.
After adopting NACH system, fund officials say that investors will have to submit a fresh mandate if they want to restart their SIPs in old folios. “There will be no change in the existing SIPs. However, new mandate will be required for each scheme if investors want to restart SIPs in old folios,” said Jimmy Patel, CEO, Quantum Mutual Fund.
Here’s how NACH helps investors and distributors. Earlier, distributors had to register multiple mandates if their clients wanted to invest through SIP in say, four different schemes. With the new system, distributors can register four SIPs through one mandate. The process has become simpler even in case of lump sum investments. NACH can be also utilized to pay utility bills and insurance premiums.
Currently, registering a SIP ECS mandate takes up to 30 days and there is no process to track if the ECS has been confirmed at the bank’s end. The new system helps fund houses to register SIP mandates in 10 days. Also, NACH is also lower in cost as compared to ECS as well as it entails less paperwork.
AMC officials believe this is a very logical step to making the transaction process simpler and real-time. “Earlier the SIP registration process was different across banks. With NACH, everything will come under one roof which will make the process simpler,” said Swarup Mohanty, CEO, Mirae Asset MF.
While a majority of fund houses have already adopted NACH, others are gearing up to adopt to the new system by March 1.
