Missed Your SIP? Know the Bounce Charges Across Banks in India

Systematic Investment Plans (SIPs) offer a disciplined mode of investing in mutual funds, but bounced SIP transactions due to insufficient balance often attract significant penalty charges. 

These bounce charges differ from one bank to another and can diminish investor returns, especially for those investing with smaller SIP amounts.

SIP Bounce Penalties: How Much Do Banks Charge?

Each time a SIP instalment fails due to insufficient balance, banks levy what is called an ECS or NACH return charge. These fees can be hefty. 

For example, ICICI and Kotak Mahindra Banks charge ₹500 per failed transaction, while SBI and Punjab National Bank charge ₹250. Meanwhile, HDFC charges begin at ₹450 and increase with each subsequent failure. Adding 18% GST further inflates these charges. A failed SIP of ₹250 may cost the investor almost double in penalties.

Breakdown of SIP Bounce Charges by Bank

The charges vary notably. Axis Bank starts at ₹500 and increases to ₹550 for repeat bounces. The Federal Bank follows a similar model. Charges are tier-based in Canara Bank, ranging from ₹300 to ₹2,000, depending on the SIP size. IndusInd Bank charges ₹350 for the first failure in a quarter and ₹500 thereafter. IDFC First Bank sets a maximum of ₹750 after 3 failures. Smaller banks like Nainital Bank and Indian Overseas Bank maintain charges at ₹250.

Impact on Small SIP Investors and Rural Clients

These charges disproportionately affect smaller investors. For SIPs under ₹1,000, a ₹500 bounce fee plus GST eats a significant chunk of returns. Investors in B30 (Beyond Top 30) cities, who often face irregular income patterns or delayed salaries, are particularly vulnerable. Penalties discourage continued investments, reducing mutual fund penetration in non-metro regions.

Read More: The Wealth Company Mutual Fund Files Draft With SEBI for Arbitrage Fund!

Recommendations for Minimising Bounce Risk

Investors with inconsistent cash flow should consider switching to quarterly SIPs or opting for lump sum investments. Keeping reminders ahead of SIP dates and ensuring sufficient balance can protect them against avoidable fees. Financial discipline proves essential to avoid losing returns to penalty charges.

Conclusion

SIP bounce charges across banks vary widely, from ₹200 to ₹2,000 per instance, and pose a financial burden to investors. Understanding each bank's fee structure and planning SIPs accordingly can help avoid unnecessary losses and ensure investment goals remain intact.

Disclaimer: This blog has been written exclusively for educational purposes. The securities or companies mentioned are only examples and not recommendations. This does not constitute a personal recommendation or investment advice. It does not aim to influence any individual or entity to make investment decisions. Recipients should conduct their own research and assessments to form an independent opinion about investment decisions.

Investments in the securities market are subject to market risks. Read all the related documents carefully before investing.