The Benefits of a One-Time Mandate (OTM) for SIP Investors

How OTM Works

You want to set an OTM for a monthly SIP of ₹5,000. You register once, providing your bank account details, SIP amount and frequency (monthly/quarterly). Your bank verifies and activates the mandate, usually within 1-2 days for online registration.

From the next SIP date, your bank automatically debits ₹5,000 and transfers it to the mutual fund. This continues for the entire SIP tenure without requiring any action from you.

Benefits of Registering for OTM

The Convenience Factor

OTM's set it up once and forget about it. No need to remember payment dates, no logging into bank accounts monthly, no setting calendar reminders. Whether you are travelling, in meetings or simply forget, your investments continue uninterrupted.

Time and Effort Savings

Before OTM, investors used ECS (Electronic Clearing Scheme) which required filling forms and submitting multiple cancelled cheques. The entire setup took up to a month.

The National Payments Corporation of India introduced OTM in 2016 through the National Automated Clearing House (NACH) system to simplify this process. Now, online OTM registration takes just minutes and activates within 1-2 days.

Ensures Discipline and Consistency

Once set up, money gets invested automatically before you can spend it elsewhere. This instils discipline and helps build wealth systematically over time.

Zero Missed Payments

You might forget the SIP due date, be travelling without internet access or face technical issues with payment gateways. OTM eliminates these risks. The automatic deduction ensures every instalment happens on time, keeping your wealth creation journey on track.

Managing Multiple SIPs easily

If you invest in multiple mutual funds through different SIPs, tracking payment dates for each becomes complicated. A ₹3,000 SIP on 5th, ₹5,000 on 10th and ₹2,000 on 15th – it's easy to miss one.

With OTM, you can register multiple SIPs under a single mandate. The total value of all SIPs combined should stay within your specified limit, but there's no restriction on the number of SIPs.

Enhanced Security

OTM is a safe and secure payment mechanism. The mandate requires your bank's approval, adding a security layer. Banks use secure protocols and encryption for all transactions, reducing fraud risks compared to repeatedly entering payment details online.

Reduced Transaction Failures

Manual online payments sometimes fail due to technical glitches, server issues or incorrect detail entry.

OTM reduces these risks significantly. Since it's a pre-authorised, automated process managed by banks through NACH, the chances of transaction failure are minimal. Even if there's insufficient balance, you will receive a notification and can arrange funds, but the mandate remains active for future instalments.

Setting up OTM online

The registration process is simple and quick. Visit your mutual fund platform's website or app, navigate to the payment or mandate section and select "Register OTM" or "e-Mandate".

Enter required details including bank account number, IFSC code, maximum debit amount, frequency (monthly/quarterly) and start date. Verify using OTP sent to your registered mobile number.

For most platforms, you can also set up OTM using your UPI ID or debit card for instant authentication. The mandate activates immediately or within 1-2 days.

Setting up OTM offline

If you prefer offline registration or don't have internet banking access, you can submit a physical OTM form. Get the form from your mutual fund AMC or bank, fill in your details, sign and submit it.

Note that offline mandate registration takes longer – typically 10-15 working days – compared to instant online activation. Plan accordingly to ensure your mandate is active before your SIP start date.

Cost considerations

Setting up OTM is usually free. Most mutual fund platforms and banks don't charge for mandate registration.

Some banks might charge a nominal fee (₹50-100) for offline physical mandate submission, but online e-mandates are typically free.

The convenience and consistency OTM provides far outweigh any minimal charges you might incur.