SIP or systematic investment plan is often preferred by investors as it offers far better protection against market turbulences, makes the investments affordable for common investors, and fetches higher earnings irrespective of market conditions. Choosing the desired investment scheme and paying the first SIP may be easy, but an investor’s job doesn’t end there. He/she has to make the SIP payment periodically to ensure sufficient wealth accumulation as per investment objective. With the One-Time Mandate or OTM, however, an investor can avail the auto-pay option to continue SIP through the eNACH mandate.
So, what is One-time mandate and how does it benefit an investor? Here’s all the information about this payment facility that investors need to know about.
What is an One Time Mandate in SIP?
A one-time mandate in SIP involves:
- a one-time registration process
- the investor instructing his/her bank to deduct a specified amount from the savings account
- crediting the amount to the SIP portfolio
- payments made at regular intervals.
After the OTM facility is activated, the periodic SIP payments are automated and this can act as a big relief for investors as it eliminates the manual task of transferring money frequently into the investment account.
What is covered under OTM in mutual fund investments?
The two types of payments covered under OTM are:
1. New lump-sum payments
With OTM, an investor can make payments towards lump-sum investments using his/her bank account. This gets processed as per the OTM facility’s maximum limit.
2. New SIPs
One can also initiate new SIP investments through the OTM facility. In this case, an investor does not have to submit his/her bank details or canceled cheque once again.
What are the benefits of OTM in SIP?
Some of the main advantages of using OTM are:
Easy registration
It is easy to register for an OTM facility in SIP. An investor only has to fill and submit an OTM form with his/her signature, thereby agreeing to the facility’s terms and conditions. It normally takes up to 10-15 working days for registration of One-Time Mandate to be accepted and registered by the bank. Whereas an e-mandate takes just 2 days to get registered.
No payment delays
OTM facility is known as the ‘e-wallet of investing’. This safe payment process is technologically advanced and entirely digital. Therefore, an investor will not have to go through any payment delays. This is a convenient option as compared to filling out numerous cheques or following the lengthy auto-debit formalities.
Secure mechanism
SIP OTM is a safe investment mechanism. To make the process smooth and quick, it involves seeking information from investors, like bank account and mutual fund details. OTM requires very little time as compared to other payment processes that waste time in frequent repetition of formalities.
No limit on the number of SIPs
By using a single One-Time Mandate registration, an investor can easily automate multiple SIP payments. While there is no limit on the number of SIPs that are allowed to be registered under a single OTM, an investor must ensure that the net value of all SIPs combined falls under the specified limit.
Encourages financial discipline
Financial success comes by setting long-term goals, high willpower and significant effort. Sometimes, wealth creation is not just about investing loads of money, but about investing it smartly. Processes like OTM that help in automating payments at pre-decided periodic intervals. Thus, it infuses a sense of financial discipline in the long run.
How to Register for OTM facility?
As mentioned earlier, it is easy to register for OTM. While registering for this facility, an investor has to mention the below-mentioned details in the form:
- Personal details: Here, an investor has to mention:
- his/her contact details
- details of account holders of the linked bank account
- names and signatures of all account holders
- Bank details: Here, details to be provided include:
- the name of the investor’s bank
- bank branch where the account is held
- IFSC code of your bank
- Bank account details: Usually, only one bank account per form is allowed. An investor must provide:
- his/her bank account number
- type of bank account.
- Investment details: An investor must provide:
- Investment folio number
- a debit amount option
The fixed option can be used for SIP investments, whereas the maximum amount is ideal for lump-sum investments. An investor can also opt for setting the payment frequency, which can be monthly, quarterly, half-yearly, or as presented.
- Upper limit: Under this, an investor must specify an upper limit that can be transferred using this payment option. The amount that is mentioned here can be more than the investor’s SIP contribution or a lump sum investment.
How to automate SIP?
To automate SIP on the Fisdom app, you can follow the below-mentioned steps:
- Choose the fund you want to invest in
- Tap on the ‘Fund’ and go for ‘Fund Details’ page
- Tap on ‘Invest Now’
- Select the SIP option
- Enter the amount you want to invest through SIP
- Select the monthly SIP date
- Make payment
Conclusion
The OTM mechanism in SIP is one of the safest and most reliable alternatives for investing in mutual funds online. Those who want to invest in mutual funds through SIP must make the most of OTM, since it comes with a lot of convenience. With most platforms offering the process online, one can do away with filling multiple forms or manual bank payment clearances.
