One-Time Mandate (OTM) is a feature that allows investors in mutual funds to automatically invest a fixed sum on a specified date in the mutual fund of their choice. This article helps you understand everything about OTM in detail.
What is OTM in mutual funds?
OTM, a one-time registration procedure, enables you to invest in mutual funds in an easy, convenient, and paperless method.
In simple terms, it is the permission you give to your bank account to debit the money up to a specific limit in a day to the mutual fund of your choice. You can use this service whenever you transact with a mutual fund.
Once you choose the OTM option, you won’t ever need to fill out a mutual fund investment form again, especially one requiring a check.
Transactions in your portfolio are only carried out based on your instruction to the mutual fund.
When you fill out the OTM form, you can indicate the maximum daily amount you are comfortable investing without a cheque.
Because your bank and mutual fund are involved, your transactions should be secure.
You can easily choose this option if you wish to invest in a mutual fund of your preference without repeatedly going through the same procedures.
How to register for an OTM in Mutual Funds?
OTM’s registration procedure is easy. The investor must enter the following information on the OTM form:
Details of the Bank Account:
You need to mention your bank account number and account type. Each form can only hold one account.
Details of the Bank:
You must provide information like your bank’s name and the branch where you have an account. Additionally, you must mention your bank’s IFSC code.
Maximum Limit:
You must choose the maximum amount that can be sent through this platform. The amount you mention here may be higher than your SIP contribution or lump sum.
Personal Information:
You must include your contact information and the information of all account holders for the mentioned bank account. The account holder’s name and signature are included in the details.
Investment Information:
You must enter your folio number and select a debit amount. The fixed option is helpful for investments like SIPs, while the maximum amount is appropriate for lump-sum payments.
You can also choose the frequency of the debit amount, such as monthly, quarterly, half-yearly, or whenever it occurs.
Declaration:
Once you have completed the OTM form with the required information, you must sign it along with other account holders.
Please be aware that the signature on the OTM form and the one on your bank account must match.
The OTM method is the most secure and dependable way to make online mutual fund and SIP investments.
OTM is extremely practical if you wish to invest in a SIP. You can avoid filling out numerous documents and physically processing bank payments by completing the process online.
What Transactions Are Covered by OTM in Mutual Funds?
New Lump Sum Investments:
Your bank account can be used to make contributions toward your lump-sum investments. It will be processed based on the fixed OTM form limitation.
New Systematic Investment Plan (SIP):
Through the OTM service, you can start making investments in new SIPs. You won’t need to re-submit your bank information or cancel cheque.
Benefits of the OTM in Mutual Funds:
Enables Mutual Fund Investments:
OTM is a one-time registration method that allows investors to make investments over a certain period, and it permits mutual fund investing for investors.
Participation of Non-Technical Investors:
Only some of the investors in mutual funds be strong in technology. If they don’t have access to net banking or prefer not to use online banking to make online payments, they can use the OTM form to register the mandate in their bank account and then make regular mutual fund investments.
Shorter Registration Period:
It takes 21 to 30 days to complete a standard SIP registration through the ECS (Electronic Clearing System) option.
On the other hand, OTM registration is simple and fast. Investors can create a SIP in less than five days if the mandate is already registered in a bank account.
Multiple Systematic Investment Plans (SIP):
Multiple SIPs may be registered under a single OTM. However, it is necessary to ensure that the total value of all SIPs remains within the mandatory limit.
Rapid Processing:
Real-time transactions between mutual fund companies and bank accounts help mutual funds realize funds quickly.
This allows the units to be distributed on the same day because mutual funds can only distribute units to investors when their bank accounts are credited.
Conclusion:
Mutual funds (MF) are becoming increasingly popular among investors due to their ease of use. You can invest in MF as a lump sum or through a systematic investment plan (SIP).
Investing in a mutual fund plan with a systematic investment plan involves periodic withdrawals from the investor’s bank account.
In the OTM method, the investor approves withdrawal requests from the mutual fund house up to a certain limit using their bank account.
The OTM debits are processed by NACH (National Automated Clearing House).
It allows investors to make routine investments in mutual funds by completing the registration process.
This simplifies the entire investment procedure and makes it easier for investors to begin their financial adventures.