Though most of us give electronic clearing service (ECS) mandate to fund houses for our systematic investment plan (SIP) with mutual funds (MF), some investors still give post-dated cheques. Typically, if the scheme’s name changes midway, most fund houses do not ask investors to re-issue a fresh SIP mandate. But in some cases, you may be asked to give a fresh set of post-dated cheques for the remaining months under the new scheme name.
ECS MANDATE GOES ON
An investor enters in an SIP either by giving post-dated cheques, or through Internet platforms, or by giving a standing ECS instruction to the MF. If you tie up with a payment aggregator such as Bill Desk (IndiaIdeas.com Ltd) and Bill Junction (TechProcess Solutions Ltd), when you give your ECS mandate, the aggregator steps in, confirms your signature and the ECS mandate with the bank. Since SIP inflows comes from lakhs of investors spread across the country and hundreds of branches, payment aggregators are better equipped to approach banks and collect payments (since they also collect money for utility companies’ customers such as mobile telephone companies) as against AMCs. Partnering with payment aggregators also ensures that its own systems undergo changes every time a scheme name changes since they collect the money from your bank account and transfer it to the scheme’s bank account. In other words, they deal with the changes themselves. This way your ECS mandate continues without disruption.
PHYSICAL MANDATE DOUBTFUL
Most fund houses also ensure continuity here as well. Every time you deposit a cheque in a bank, you have to fill out a deposit slip. But institutional customers such as mutual funds get a cash management services (CMS) facility whereby they can deposit cheques in bulk using—what each of their banks provide them—a CMS code. A change in scheme name usually does not change the CMS code. Hence, life goes on as usual. Some fund houses, though, insist on investors re-submitting a fresh set of cheques because they claim that every MF scheme has a new bank account and every time a scheme changes its name, it has to open a new bank account in that name. As a result, the old bank account (under the scheme’s old name) eventually gets shut. This, they claim, usually happens when there are scheme mergers. Most MFs tell us that today’s technology enables them to ensure status quo.
However, it’s always safe to check with your agent when such changes happen. Stick to ECS mandates. If you must give post-dated cheques, limit yourself to a two-year time frame.
—Kayezad E. Adajania