How to start an SIP with a One-Time Mandate?

Systematic Investment Plans or SIPs are a convenient way to put money into mutual funds through easy instalments over a tenure that suits you. The process has become even simpler ever since the National Payments Corporation of India introduced the National Automatic Clearing House (NACH) facility for inter-bank periodic payments in 2016. Through this system, all you need to do is initiate a one-time mandate (OTM) authorising a vendor to debit money directly from your bank account.
In the context of mutual fund SIP investments, you can issue an OTM allowing the transfer of your instalment amount from your bank account to the chosen fund on a set date every month.
This means that after taking the first step in your investment journey, the rest happens seamlessly and automatically. Through SIP investments, you have the potential to build wealth over time. Read on to understand how to start an SIP with OTM.

• Table of contents:

1. How exactly do NACH and OTM work?
2. How to set up an OTM for SIP?
3. Through the NACH Mandate form
4. Through E-NACH
5. Benefits of one-time mandate in SIPs
6. How to automate your SIPs?

How exactly do NACH and OTM work?

A NACH mandate or OTM authorises a vendor to debit money directly from your bank account. This system was introduced in 2016 for inter-bank bulk transfers, before which banks used the more tedious Electronic Clearing System or ECS. NACH was introduced as a centralised system to bring together all regional ECS systems across the country.
Once you authorise a particular collection agency through a one-time mandate, you need not repeatedly issue a cheque or initiate an online bank transfer. The money is automatically debited from your bank account on a fixed date.
NACH can be used by banks, businesses, and government bodies. It can be used for loan repayment, bill payments, transfer of government benefits, salary disbursements, mutual fund SIP transactions and several other recurring and periodic payments.

How to set up an OTM for SIP?

This one-time registration process gives a standing instruction to your bank allowing the mutual fund company to debit a certain amount from your bank account on a set date every month. The money towards your SIP investment goes from your bank account as per your schedule every month, week, quarter, or any other chosen frequency. The OTM is also valid on other mutual fund investments with the same asset management company.
There are two ways to set up a one-time mandate for your SIP investments:

Through the NACH Mandate form

Once you have decided which mutual fund to invest in, you can get the OTM form from the fund house’s website. You will be required to fill in the following details:

• Bank account information, including bank name, account number and IFSC code.
• Your name as per bank documents. Some forms may also ask for your Permanent Account Number or PAN, registered mobile number, residential address or other personal information.
• The amount that you want to invest per SIP and the frequency. You may also need to enter a mandate limit, which is the maximum amount that can be debited from your account for that mandate. The upper limit can be higher than your SIP – similar to how a credit limit works – but the fund will only debit only the pre-determined instalment amount. This is so that if you increase your SIPs later, or start another SIP with the same fund house, you don’t need fresh paperwork.
• The start and stop date for the SIP. If you have planned a fixed number of investments, you can enter the start and end date of your SIP. Or you can choose the ‘until I Stop’ option if you plan to stay invested for an undefined period.
  Once you’ve filled out the form, you can sign it and submit it to the asset management company. Some websites may have the option to upload the signed OTM form online, while others may require you to submit a hard copy to the fund house. You may also have to submit a cancelled cheque. The OTM activation can take up to 10 days.

Through E-NACH

Many banks have the e-NACH facility, which does away with the need for paperwork. All you need to do is fill in a few basic details, including your name and bank account information on the fund house’s website, after which the mandate is authorised through net banking or debit card. E-NACH mandates are usually registered in two to three days; some banks may do so even sooner. Since your paperwork is completed online, there is no need to fill out and share any physical documents.

Benefits of one-time mandate in SIPs

A one-time mandate (OTM) simplifies SIP management, facilitates consistent investments, and promotes disciplined financial habits reliably. Some of the benefits are:

Hassle-free: OTM automates SIP payments, removing the need for manual transfers or remembering payment dates.

Time-saving: Once registered, the process operates seamlessly, reducing the need for active involvement in managing monthly payments.

Consistent contributions: OTM facilitates timely payments, preventing disruptions in investments due to forgetfulness or busy schedules.

Disciplined investing: Regular payments optimises the benefits of SIPs.

Predictable deductions: Scheduled SIP deductions help plan cash flow more effectively and avoid surprises.

Prioritising investments: Automating contributions ensures investment goals are met without being derailed by discretionary spending.

How to automate your SIPs?

Your mandates can be created through the following routes:

Bank mandates: Authorise your bank to deduct the SIP amount on the scheduled date automatically.

UPI autopay: Link your UPI ID to your mutual fund investment account. The investment amount is automatically deducted from your linked bank account on the SIP date. The maximum mandate amount for UPI may be lower than if executed directly with the bank.

Steps to automate your SIPs:

The exact process may differ from one mutual fund company to another, but here are the steps involved:

1. Select your scheme: Opt for a mutual fund scheme that matches your financial goals, risk appetite, and time horizon.
2. Set up your account: Register with the asset management company with your name, PAN, date of birth and other basic details. You can also invest through aggregators and mutual fund distributors. You may choose to invest online or offline.
3. Enter your bank account information: Your account number, IFSC code, account type
4. Enter SIP details: Specify your SIP amount, frequency, and starting date.
5. Choose your method: Decide between UPI or bank mandates.
6. Set the mandate limit: Choose a high limit for your mandate. While the amount deducted will still be your chosen SIP amount (Rs. 500, Rs. 5,000 etc.), a higher mandate allows you to top up your SIPs at a later date, make additional lumpsum payments, or start new SIPs with the same fund house without needing to repeat the mandate registration process.
7. Authorise the payment: Approve the mandate through your bank’s website or UPI app, as the case may be.

Conclusion:

One-time mandates make the process of investing in mutual funds seamless and easy. The auto-deduction of money from your bank account saves you the trouble of having to remember your due date or initiate a transfer or cheque payment for each instalment. Depending on your preference, you may choose the physical NACH mandate option or set it up online. Additionally, using an SIP calculator can help you plan your investments effectively. The tool can help you determine a suitable investment amount and horizon based on your expected returns and financial goals. When registering the mandate, you can also consider doing a top up SIP, where your SIP contributions increase by a percentage set by you at regular intervals (semi-annually, annually etc). A top up SIP calculator can help you visualise the growth potential of this investment approach.

FAQs:

What documents are needed for a one-time mandate SIP?

You typically need KYC documents, bank details, and a filled SIP registration form to set up a one-time mandate SIP.

Can I change the investment amount in a one-time mandate SIP?

Usually, the investment amount is fixed for a one-time mandate SIP. However, some funds might allow you to adjust it under certain conditions. Before you invest, you can take the help of an SIP calculator to identify an investment amount that may be suitable for you based on your goals and investment horizon.

Can I start SIP without autopay?

Yes, you can start a SIP without autopay by making manual payments for each installment through net banking, UPI, or cheques. However, this method requires you to remember and ensure timely payments to avoid missed contributions,

Is there a one-time investment in SIP?

No. A "one-time investment in SIP" does not exist, as SIPs involve systematic, recurring investments over time. For single, large investments, the correct term is a "lumpsum investment," which differs from SIPs in strategy and risk exposure.

How can I start an SIP with a one-time mandate?

To start an SIP with a One-Time Mandate (OTM), select a mutual fund scheme aligned with your financial goals. Then, choose an investment route – you can go through a distributor, an aggregator, or invest directly through the mutual fund company.

Register and provide bank details to authorise the OTM, either through the platform or your bank, by specifying SIP details like amount, frequency, and start date. After setting up the OTM and creating your SIP, ensure sufficient funds in your account for scheduled deductions and review your investments periodically for adjustments.

Is a one-time mandate required for all SIP investments?

A One-Time Mandate (OTM) may not be required for all SIP investments but is commonly chosen by investors owing to its convenience.

Can I cancel my one-time mandate for SIP?

Yes, you can cancel your One-Time Mandate (OTM) for SIP investments through multiple methods. You can cancel it through your bank’s net banking portal or by visiting the bank branch and submitting a written request. Alternatively, you can cancel it through the investment platform or mutual fund house by contacting their customer service or checking if the platform offers an option for cancellation directly.

Is a one-time mandate safe for SIP investments?

A one-time mandate (OTM) is generally safe for SIP investments when used correctly and done through an authorised and reliable platform.

What documents are needed to start a SIP with OTM?

To start a SIP with OTM, the following documents may be required:

• Identify documents: Full name, date of birth, PAN, contact information (phone, email), and address proof (Aadhaar, driving license, etc.).
• Bank account details: Bank name, account number, IFSC code, and account holder's name.
• SIP details: Chosen mutual fund scheme, SIP amount, investment frequency (monthly/quarterly), and start date.

Always verify the exact documents needed with your chosen investment platform or mutual fund house.

How long does it take to activate an SIP with a one-time mandate?

The activation time for a SIP with a One-Time Mandate (OTM) depends on the processing time your bank and the platform take. Typically, it can take a few business days to a couple of weeks for the SIP to be fully activated. You'll receive confirmation once the OTM is registered.

Mutual Fund Investments are subject to market risks, read all scheme related documents carefully.
This document should not be treated as endorsement of the views / opinions or as an investment advice. This document should not be construed as a research report or a recommendation to buy or sell any security. This document is for information purpose only and should not be construed as a promise on minimum returns or safeguard of capital. This document alone is not sufficient and should not be used for the development or implementation of an investment strategy. The recipient should note and understand that the information provided above may not contain all the material aspects relevant for making an investment decision. Investors are advised to consult their own investment advisor before making any investment decision in light of their risk appetite, investment goals and horizon. This information is subject to change without any prior notice.