Aditya Birla Sun Life AMC Limited

How to manage SIPs if your bank is affected by the financial mess

Jan 20, 2020
4 mins | Views 16233

What if one fine morning you woke up to the news that your Bank had been undergoing financial stress and there has been sever restrictions that have been imposed on the withdrawal amount. Not only will you stress on the safety of your money, but also worry about your daily transactions without cash!

The world revolves around you as you are in state of financial crises. Suddenly all the thoughts of expenses, budget, EMI’s, SIP’s surrounds your mind and you feel like snapping the finger to evaporate all your problems.

However, in real life such snaps never work, so keep your head cool and go step by step to solve the problems at a time. Here are the first 4 actionable in such situations:

Step #1: Assess the real situation of your Bank’s financial problem, without a bias

Step #2: Make list of your personal expenses, divide them in needs and wants and the prioritise them

Step #3: Check the options of receivables of income and cash

Step #4: Don’t rush and panic, things will be streamlined if actioned properly

Generally, in such situation you will first think of monthly expenses which are to be mandatorily paid and then you realised that there is monthly SIP which also needs to be paid.

Considering all the situation you may take a call to stop SIP as it may not hit the priority button on your list. So before taking such call, consider the various benefits of SIP:

  • SIP is a systematic way of saving to achieve your financial goals

  • It enables Rupee Cost Averaging method which brings down your average cost of buying

  • The power of compounding helps to makes your money grow.

  • You also get the benefit of diversification with spread of risk

  • Hassle free operation and removes the need to time the market

How to deal with SIPs in a difficult bank situation?

Considering all the benefits provided by SIPs, you should to try to continue with your SIP investments. For this, you would be required to change the ECS debit from the existing bank account and redirect it to another Bank account at the earliest.

Another option you can consider is pausing your SIP till your finances stabilise. Most of the mutual fund houses allow SIP Pause for certain period. Check with your distributor/AMC regarding the process, terms & conditions of pausing the SIP.

Sometimes, in life, we might come across certain drastic situations wherein we have no options but to revamp the whole way of looking at life. These unforeseen and uncontrollable circumstances force us to take strict actions and change the course of living.

Cutting the cost of living or curtailing the expenses is a way to face such situations. But hampering your financial goal is a difficult call to take.

SIP investment is one of the financial ways to achieve your goals and hence try to stay invested for a longer period and do not stop SIP.

For temporary constraints you may opt for Pause option. This will help to continue your SIP investment after some period and can help achieve your defined goal in the long run.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

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