There are two ways of investing in mutual funds, either through a one-time lump sum investment or through the Systematic Investment Plan (SIP). Under the lump sum investment option, the investor invests only once in the mutual fund. Let us take a close look at the SIP process where we have the option to deploy the one-time mandate (OTM) in SIP. So, what is OTM in mutual fund? Let’s dig in.
What is one-time mandate (OTM) in SIP?
As the very name indicates, investors can periodically invest in the mutual fund through an SIP. This would require them to:
- Remember the date on which the next installment needs to be paid
- Organize the transfer of funds into the mutual fund account
- Keep track of the credit into the mutual fund account
OTM in SIP addresses all three requirements in one stroke. Setting up OTM is a one-time activity where investors authorize their bank to debit their bank account and transfer a pre-specified amount at a pre-specified interval to their mutual fund account through an electronic transfer of funds. Once these funds are credited into the mutual fund account, the fund managers utilize these monies to purchase the eligible number of shares/units of the mutual fund scheme according to the applicable net asset value.
OTM in SIP is very convenient and minimizes the investors’ hassles, who need to ensure that there is sufficient balance to effect the electronic transfer on the transfer dates.
Benefits of adding one-time mandate in SIPs
The benefits that accrue to investors utilizing OTM in SIPs are as follows:
- The OTM needs to be registered only once with the bank to send the SIP remittances under the same folio with the mutual fund company. For administrative convenience, mutual fund companies make entries in the same folio for each investor under the different schemes/plans to which they have subscribed.
- OTM significantly reduces the time and effort taken each time for SIP registration.
- The payment process is flexible for future investments as investors don’t have to prepare and send cheques/demand drafts to the mutual fund company.
- OTMs can be easily modified and canceled.
Why should you choose OTM?
There are several reasons why investors prefer OTMs.
- There will be no missing periodic contribution to the SIP portfolio if the bank account has sufficient balance.
- Once you complete the OTM registration as a one-time measure, the transfer of funds will continue automatically as per the mandate given to the bank.
- The OTM registration includes only simple steps.
- OTM ensures secure transfer of money.
- OTM will help investors achieve their investment goals in a disciplined manner.
How to automate your SIPs
The internet and easy-to-use mobile technologies have made it very convenient to execute and monitor financial transactions from your home.
Online OTM: Creating an Online OTM is a paperless process. Investors can choose the OTM e-Mandate option when starting an SIP to register for auto payments. Usually, investors will be guided to their payment gateway to make a nominal payment (usually Re.1/-). This is done to verify the investor’s bank account and to register the OTM. Some mutual funds could insist on investors submitting a National Automated Clearing House (NACH) form and a canceled cheque.
Biller Method: Some investors prefer using the Biller Method. You can do this through the internet by following these simple steps:
- Create an SIP under a mutual fund scheme.
- You will receive a message or an email mentioning a Unique Registration Number (URN).
- Visit the internet banking portal.
- Create a new biller providing the following mandatory details:
- Biller Name
- Auto-debit amount
And that’s it! At any time in the future, you can cancel the mandate by deleting the biller details from the biller section.
Auto-pay by OTP
- Click on BANK DETAILS on the mutual fund website.
- Click on SETUP AUTOPAY, choosing your preferred bank.
- The screen will ask for further details. It is advisable to keep your debit card and internet banking details handy while completing this process.
Auto-pay via form
The auto-pay mode is convenient for investors who either do not have internet access or simply want to avoid the online process of making SIP payments to their mutual fund accounts.
This is a one-time process using the NACH form. The procedure has been detailed under the “How to automate your SIPs – Online OTM” section.
OTMs in SIPs offer a hassle-free way for investors to automate their mutual fund investments through a one-time procedure.
How can I activate OTM in mutual funds?
Activating OTM in mutual funds is a simple process.
– Go to the mutual fund website where you wish to create the SIP.
– Click on the button “Monthly SIP” and start the SIP.
– Enter the amount and click “Proceed.”
– Click on “Confirm and Pay.” Now, the first installment has been paid.
– Automate the next SIP deductions.
– Tap on “Generate OTM.”
How do you create a mandate for SIP?
Creating a mandate for SIP is a simple process. You will need to register an SIP with the fund. The mandate needs the approval of your bank. It could sometimes take a couple of days. Following this, your bank will finally require authorization to debit your account with the specified amount and periodicity.
How do I register my e-mandate for mutual funds?
There are effortless ways of registering your e-mandate for mutual funds. This blog explains these in detail under the “How to automate your SIPs – Online OTMs” and “How to automate your SIPs – Biller Method” sections.
Can I invest in SIP without OTM?
Yes, you can invest in Systematic Investment Plans (SIP) without Over-the-Counter Money (OTM) trading. SIP involves regularly investing a fixed amount in mutual funds, regardless of the market’s short-term movements. OTM trading isn’t directly related to SIP investments.
What is the mandate rule for SIP?
The mandate rule for SIP (Systematic Investment Plan) involves giving your bank permission to automatically debit a fixed amount from your account at regular intervals (like monthly) to invest in a mutual fund. This ensures consistent investments without manual efforts.
Which is better OTM or Biller?
Comparing “OTM” and “Biller” in the context provided is unclear. If referring to payment methods, both have benefits. OTM (One-Time Mandate) allows one-time payments, while Biller systems automate recurring payments. Choose based on your needs: one-time payments (OTM) or automated, recurring payments (Biller).
Is mandate compulsory for SIP?
Yes, a mandate is usually compulsory for SIP (Systematic Investment Plan). It authorizes your bank to deduct the SIP amount from your account on specific dates. This ensures consistent investments and simplifies the process for you.