Mutual Funds: What are ECS return charges and how to avoid them?

livemint.com:

systematic investment plan) for mutual fund investment into one or more schemes, it is understood that you have given standing instructions to your bank to deduct a pre-decided sum on a particular date. The amount that is transferred is usually deducted via Electronic Clearing System or ECS. But have you ever wondered what happens when the transaction fails to go through? ECS is, essentially, a process through which individuals authorise their bank to allow electronic transactions regularly.

This is used not only for mutual fund SIP but also for the automated payment of bills, loans, and insurance premium. This transfer of funds is facilitated by the National Automated Clearing House which was established by the National Payments Corporation of India (NPCI). Effectively, giving ECS mandate implies giving them permission to electronically debit funds from bank accounts on a specific date.

And when the transaction fails on account of lack of funds or because of some other reason, the bank is within its right to levy a penalty which is known as ECS/NACH return charges. Some of the top banks impose ECS return charges amounting to ₹500 for each failed transaction. This means if you have three SIPs running which failed because of insufficient balance in your bank, you will be entitled to incur an extra loss of ₹1,500.

The ECS return charge is a form of fees levied by a bank or financial institution when the electronic money transfer could not take place on account of lack of sufficient funds. If you have three SIPs running and the ECS return charges are ₹590 (500 + 18 percent GST) then because of low account balance, the ECS return charges will amount to ₹590 X 3 = ₹1,770. In order to avoid these charges, it is imperative that