My sip amount got deducted on Friday morning from my account . Friday, Saturday, Sunday are holidays. So what happens to my money for 3-4 days?

A question asked by an investor to me just now and my answer:

Quetion: Good morning sir, one question which always intrigues me. 

My sip amount got deducted on Friday morning from my account . Friday, Saturday, Sunday are holidays. So what happens to my money for 3-4 days?

My answer to him: On non-business days, the SIP amount deducted from your bank account does not immediately reach the mutual fund for investment. Here's what happens to the money during this time:

1. Bank's Pooling Account:

Once the SIP amount is deducted, it typically moves to the bank's or payment gateway's settlement or pooling account.

This account is used to consolidate funds before transferring them to the mutual fund house.

2. Fund House's Clearing Process:

The mutual fund house receives the money only on the next business day when banks and fund operations resume.

Until the mutual fund receives the amount, it technically remains with the bank/payment processor in their settlement account.

3. No Interest Earned:

During this interim period, the money does not earn interest, either in your savings account or in the pooling account.

However, this is a standard process in the financial system and happens to all investors.

4. Investment Execution:

Once the fund house receives the money on a business day, it is allocated to your SIP at the NAV of that day, ensuring proper investment without any manipulation or delay.

In essence, the money is safe and in transit between systems, waiting for the next business day to be invested as per your SIP schedule.

Hope I've been able to answer your query.