Navigating through bank accounts in your MF investments

Arnav PandyaOne of the conditions that investors have to fulfill when they invest in mutual funds is that there has to be a bank account linked with the investment. This is important for several reasons which include the fact that it can ensure that there are no frauds that are being committed and at the same time there is also protection for the investor in case some mistakes are made. The investment for the fund has to come from money from the linked bank account and similarly when there is a withdrawal then the money that is received would go back into the same bank account. This would ensure that the investor feels comforted. Here are some additional details related to their bank accounts.Account is compulsoryNow with the changes in rules in play over last few years there has to be a bank account that is linked with the mutual fund investment of every individual. This is important as the bank account completes the process of the investment and this can be either in terms of giving funds when an investor purchases units or receiving funds when the units are sold. Unless there is a bank account there would not be any transactions possible for an investor and the first thing that they need to do is to go and ensure that they have linked one bank account from which they are going to transact with the mutual fund investment.Multiple accountsMany people have a different kind of problem which is that they have more than one account and they might want to use any of these accounts for the purpose of making investment. This is the key part because while the amounts of dividends or other receipts like redemption can go into a single account the same cannot be fixed for the investment as this would involve a lot of effort to transfer funds from one account to the other. In this case the investor would want several accounts to be linked to their mutual fund investment and the good news is that they can do such a thing because the mutual funds provide this facility. An investor can usually join upto 5 accounts with their investment though there will be one primary account where the various payouts and other benefits will go. This is a good thing as it will enable the effective usage of the accounts.ProcedureThere is a specific procedure that has to be followed to ensure that the various bank accounts are linked with the mutual fund folio. This will involve filling up a form and then giving the various bank account details that are now standard for various purposes like MICR code and ISFC code and so on. In addition a cancelled cheque leaf copy needs to be submitted and this would have to be verified. Once these details are given then the account will be linked with the investment and the various transactions can then take place. In terms of operation there will be one account that is designated as the main account and for the others the use would be that in case there is an investment that has to be made then it can be done from one of the other accounts too. There will not be a stoppage of the investment because it is from some other account as long as this is registered. Usually having two or three bank accounts linked to the investment should be good enough as it would give the necessary amount of convenience and at the same time also ensure that things are manageable.