Understanding the features of OTM in mutual funds

Mutual funds offer investors a structured and accessible means of investing in a diversified portfolio of securities. Among the various features and processes within mutual fund investments, the concept of a One-Time Mandate (OTM) in mutual funds holds significant relevance as it simplifies the investment process for Systematic Investment Plans. This article aims to demystify the concept of OTM in mutual funds, explaining its features and benefits for Indian investors.

• Table of contents

1. What is a one-time mandate (OTM) in mutual funds?
2. What are the features of OTM?
3. What benefits do one-time mandate features offer to investors?

What is a one-time mandate (OTM) in mutual funds?

A One-Time Mandate (OTM) in mutual funds in India refers to a one-time consent provided by the investor for Systematic Investment Plans (SIPs). It is a simple registration process that enables funds to be debited from the investor's bank account for investments in mutual funds based on the SIP amount and date chosen by the investor.

Once the investor has registered an OTM with the bank, there is no need for repetitive authorisation for subsequent transactions. It streamlines the investment process for investors and prevents the chances of them missing an SIP investment. Investors keep receiving mutual fund units corresponding to the investment amount in their mutual fund account.

What are the features of OTM?

Understanding the features of OTM can empower investors to make informed decisions regarding mutual fund investments. Here are the top 3 features of OTM in mutual funds:

Convenient: OTM simplifies the investment process by removing the need for investors to provide consent for each individual investment. Once the mandate is established, all the subsequent investments can be executed seamlessly. Thus, OTM in mutual fund makes the investment go into auto-pilot mode and the investor does not have to worry about manually authorising the instalment each month.

Full control: Despite the automated nature of OTM in mutual funds, investors retain full control over their mutual fund investments. They can modify or revoke the mandate based on their evolving financial goals and investment preferences. OTM is there just to allow the auto-deduction of the SIP amount from their bank account.

Completely secure: OTM is a secure facility provided by banks. Once you set up the mandate, your SIP payments will always go through on the date you chose at the time of OTM registration as long as you have sufficient balance in your account.

What benefits do one-time mandate features offer to investors?

Here are the top 3 benefits of OTM:

Time saving: OTM in mutual funds can save investors a lot of time by eliminating the hassle of repetitive authorisations. They do not even have to worry about missing payments since the OTM ensures systematic investments in mutual funds. Each instalment is debited automatically from the bank account and invested into the mutual fund.

Enhanced discipline: OTM fosters financial discipline by facilitating automatic investment in Systematic Investment Plans (SIPs) with no regular involvement of the investor. This helps cultivate a regular savings habit. Also, investors are less likely to make impulsive decisions if they have an investment smoothly going on in the background, as compared to an investment they must actively see and approve every month.

Multiple SIPs in one OTM: Investors can register more than one SIP under one OTM. The only caveat is that the total value of the instalments should be less than or equal to the OTM limit set by the investor. This makes the whole process of running multiple SIPs hassle-free.

In conclusion, One-Time Mandate (OTM) in mutual funds serves as a convenient tool for simplifying and automating the investment process. By understanding the functionality and benefits of OTM, investors can harness its potential to cultivate disciplined investment habits, optimise portfolio management and working toward their long-term financial objectives. Embracing technology-driven solutions like OTM underscores the evolving landscape of personal finance as it empowers individuals to navigate financial planning with confidence and efficiency.

FAQs:

How to set up an OTM in mutual funds?

Establishing a One-Time Mandate online for mutual fund investment is a straightforward process:

• Login to the mutual fund house or investment platform where you want to start investing.
• Go to the profile section and select the “autopay” or “set-up autopay” section.
• Enter the bank account details from which you want to investment amount to be auto-debited.
• Verify your bank account through debit card or net banking with OTP received on your registered mobile number.
• Confirm the OTM details and complete the registration process.

Can I cancel my OTM mandate?

Yes, you can cancel it. OTM mandates give you the freedom to add multiple SIPs under one mandate and modify or cancel it based on your investment goals.

How many SIPs can be registered with one OTM?

You can register multiple SIPs with a single OTM (One Time Mandate) as long as the total investment amount does not exceed the limit set by the bank

Can multiple bank OTM registered for the same folio?

Yes, multiple bank OTMs can be registered for the same folio. Each OTM is linked to a specific bank account, allowing you to set up SIPs from different accounts within the same folio. This provides flexibility in managing investments across multiple accounts.

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 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.