SIP stoppage ratio hits record 296% in April amidst record monthly flows as well

Simply put, SIP stoppage ratio refers to the ratio of SIP accounts closed/matured during the month and new accounts opened.

Systematic investment plans (SIPs) saw a record Rs 26,632 crore pour in during April, even as the stoppage ratio hit a record of its own to touch nearly 300 percent – 296 percent to be precise.

Data from the Association of Mutual Funds in India (AMFI) showed that a total of around 1.36 crore accounts were stopped or matured during the month, while around 46 lakh new SIP accounts were registered.

Simply put, the SIP stoppage ratio refers to the ratio of SIP accounts closed/matured during the month and new accounts opened.

Interestingly, there has been a jump in the SIP stoppage ratio since January, as the metric has been over 100 percent in each of the last four months. In other words, the number of SIP accounts closed or matured has consistently been higher than the number of new SIP accounts opened during the month.

While this may sound alarming, industry players say that the spike is only on account of a reconciliation process being undertaken by AMFI. The process involves reconciling the number of SIP accounts with Registrar and Transfer Agent (RTAs) and those with the exchanges.

Also Read: MF flows in April: Equity Funds see 50th straight month of inflows; SIPs hit new record high

“SIP account can be opened with the RTAs or even with exchanges, as they offer a mutual fund platform as well. It was observed that there are many dormant accounts, and hence a reconciliation process was initiated to weed out such accounts between the two categories (RTAs and exchanges),” said the head of a mutual fund house.

Incidentally, while speaking to the media while presenting the monthly numbers, AMFI Chief Executive Venkat Chalasani said that the high SIP stoppage number was a result of the reconciliation process undertaken by RTAs and exchanges.

More importantly, he said that the process ended in April, and so the ratio will come down in May. In April 2024, the SIP stoppage ratio was pegged at 52 percent and stayed between 50-60 percent for most months of last year, though there were occasional spikes.

Industry participants further say that the stoppage ratio should not be looked at in isolation, as fund flows never took a hit even as the reconciliation process was on.

“High stoppage ratio is not an alarming data point as the flows are still hitting record highs. The reconciliation process will only lead to the elimination of dormant or discontinued accounts without any impact on the flows,” said another chief executive of a mutual fund.

The SIP net flows were hovering around the Rs 26,000-crore mark in February and March, with January seeing Rs 26,400 crore pouring in.