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Business News/ Money / Calculators/  You have to inform the fund house of change in primary bank account
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You have to inform the fund house of change in primary bank account

If your bank account details have changed, the onus is on you to inform the fund house

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Before you redeem your mutual fund investments, it’s important to check your bank account details. And here is why.

A Mint reader had written saying that one of his mutual fund (MF) schemes was due for maturity, and that his bank-based distributor wanted him to reinvest his proceeds into another scheme. He agreed. However, he didn’t get the redemption money in any of his bank accounts. Instead, the fund house sent him a letter saying that it could not deposit the redemption amount into his registered bank account because “the bank account was invalid". Surely enough, the reader had closed the bank account. What he found strange was that the fund house also enclosed a cheque for the redemption amount with his name and his bank account number on it. The account details mentioned were of the same bank that the fund house said had been closed. “Why would the fund house send me the cheque to be deposited in the same bank that it knows has already been closed?" he asked.

It turns out that the fund house was just following the rules set by the Securities and Exchange Board of India (Sebi) back in 1997. The rules state that fund houses must mention their investor’s name as well as some additional details on the cheque. Most prefer to write the account number on it, while some write the customer’s address.

Sebi had put these rules in place to prevent fraud and to ensure that the redemption money reaches the rightful owner. In our reader’s case, he should have ideally informed the fund house that he had closed his bank account and given the new account details. In fact, his distributor ought to have done that for him.

Multiple bank accounts

Fund houses allow investors to register at least five bank accounts to their folios. This is done so that if during the course of time you close your primary account, you do not have to fill up a fresh form or give cancelled cheques at the time of redemption. Sending a letter to your fund house is enough to issue instructions to send money into one of the other registered bank accounts.

Do keep in mind that if you have closed your primary registered bank account, but fail to inform your fund house, it will send you the cheque with your primary account details mentioned on the cheque leaf, even if you have registered multiple bank accounts with it. This is because the fund house cannot decide, on your behalf, which of the remaining accounts to send the money to.

What you should do

Keep an eye on your account statements. You’ll find your folio details there, including your registered bank account details. If there is a change in the account number, or you have closed that bank account, write a letter to the fund house. Send a cancelled cheque of the new bank account. Remember, that if your bank account details have changed, the onus is on you to inform the fund house.

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Published: 18 Feb 2016, 07:14 PM IST
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