What Happens to Your Mutual Fund Investments When You Close Your Bank Account?

Mutual Fund Investments

Let’s paint a quick picture. You’ve been diligently investing in mutual funds. Your SIPs are running on time. Your portfolio is gradually growing. Life’s good.

Now imagine you’ve just moved cities. Maybe you were in Lucknow and recently shifted to Hyderabad. You decide to close your old Lucknow bank account and open a new one closer to your new home. Makes sense, right?

But here’s the catch: what you didn’t realise is that your mutual fund SIPs and redemptions were all linked to your old bank account. A few weeks later, your SIPs stop, redemption requests bounce, and suddenly your investment journey hits an unexpected roadblock.

But don’t worry! Your investments are completely safe. You just need to take a few smart steps to avoid any disruption. Let’s understand what happens when your registered bank account gets closed and how you can smoothly manage your mutual fund investments in such cases.

SIP Gets Affected? Yes, It Can.

Your SIPs work on an auto-debit mandate from your registered bank account. If that account is closed, your SIPs won’t go through. If this continues for a few cycles, the mutual fund company might even cancel your SIP altogether.

What you should do: Update your new bank account details as soon as possible! You can do this through the Asset Management Company (AMC), your financial advisor, or any mutual fund platform you use.

Redemption or Dividend Payouts May Fail

Let’s say you try to redeem some of your investments or have set up a Systematic Withdrawal Plan (SWP), or expect dividends. These amounts get credited to your registered bank account. If that account is closed or inactive, the transaction fails.

The money doesn’t disappear, though. It’s safely held by the AMC until your new bank details are updated.

Here’s what you should do:

• Before requesting redemptions or setting up SWP or dividend plans, double-check your bank details.
• If a payment fails, immediately reach out to the AMC to update your bank info.
• Once your new bank is registered and verified, request the AMC to reprocess the payout.
• Many AMCs even allow you to claim older unpaid dividends, so don’t wait too long.

How to Protect Your Mutual Fund Investments When Switching Bank Accounts

1. Update Your Bank Account Promptly
The moment you open your new account, make it a priority to update your bank details in all your ongoing investments.

2. Track All Your Transactions
Keep an eye on SIP confirmations, redemptions, and payout receipts. If anything fails, act quickly.

3. Maintain Balance in Both Accounts Temporarily
If possible, maintain a small balance in both your old and new accounts until your SIP transitions are fully complete.

Also, check – Can A Minor Invest In A Mutual Fund?

Final Thought

Closing a bank account isn’t a big deal. But forgetting to update it in your investment accounts? That can create unnecessary confusion and delay.

Your money is safe. But you need to take ownership of the situation to ensure it keeps working for you.

Be vigilant. Act early. And if ever in doubt, ask questions.

And of course, if you’re facing any issue like this or have a question, feel free to drop a comment or reach out to our team at BFC CAPITAL. We’re always here to help you stay in control of your financial journey.

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Disclaimer – This article is for educational purposes only and does not intend to substitute expert guidance. Mutual fund investments are subject to market risks. Please read the scheme-related document carefully before investing.