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

Article summary: 

A one-time mandate (OTM) simplifies your SIP investments by doing the heavy lifting for you. With just one directive to your bank, you can automate all future payments. In this blog, we'll show you how OTM can elevate your SIP investment journey and guide you through the easy process of setting it up and running.

When you visit a mutual fund platform to review investment options, you'll find that most funds offer two main ways to invest: a one-time investment and a systematic investment plan (SIP). A one-time investment allows you to invest a significant sum all at once, giving you the flexibility to invest based on market conditions or when you have extra funds. On the other hand, a SIP enables you to invest a fixed amount regularly, helping you build your wealth over time while reducing the impact of market volatility. SIPs offer a disciplined and convenient way to invest, particularly if you prefer to make smaller contributions on a monthly, quarterly, or yearly basis.

If you choose a SIP, you can streamline the investment process by establishing a a one-time mandate (OTM). This ensures that your investments are made on time, and you never miss a SIP contribution. So, how do you go about creating an OTM? In this blog, we'll discuss the details of one-time mandates and their benefits.

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

Before OTM came into the picture, we relied on the electronic clearing scheme (ECS) for managing our SIP investments. This older approach made us complete forms and hand in several cancelled cheques, often taking as long as a month to finalise the setup.

In 2016, the National Payments Corporation of India introduced OTM to make SIP investments more straightforward. This feature is part of the National Automated Clearing House (NACH), a system that facilitates large-scale electronic transactions between banks.

With OTM, you issue a single instruction to your bank, authorising it to manage all your future SIP investments. This one-time setup allows your bank to automatically deduct a designated amount from your account at regular intervals, funding your SIP investments. This eliminates the need for you to transfer money or approve transactions manually each time you invest in your SIP.

It's worth noting that NACH has recently revised the rules. As of October 1, 2023, you can set up your SIPs to last for up to 30 years. However, you must specify an end date, a departure from the previous system where SIPs could continue indefinitely. This new guideline aids you in planning your long-term investments more effectively.

Benefits of one-time mandate (OTM) for SIP investors 

OTM provides several advantages, not only for SIPs but also for fresh lump-sum investments. Some of the common benefits include:

• Convenience 

OTM offers unparalleled convenience. Imagine not having to remember payment dates or log into your bank account every month to transfer funds. With OTM, you set it up once, and your SIP investments take care of themselves. 

• Time-saving

Time is money, especially when it comes to investments. The time you save by not filling out ECS forms or writing cheques can be better spent on researching investment options or simply enjoying life. 

• Flexibility in investment

While OTM automates your SIP investments, it doesn't lock you into a rigid structure. You can still modify the SIP amount or pause the investment if needed. This gives you the best of both worlds: the discipline of regular investments and the flexibility to adapt to changing financial circumstances.

• Lower transaction costs

Automating your SIP payments through OTM can often reduce transaction fees. Fewer manual transactions mean fewer charges, making your investment even more cost-effective.

• Improved cash flow management

OTM helps you manage your cash flow better. By automating your SIP investments, you can easily align them with your income cycle, ensuring you always have sufficient funds for both your investments and other expenses.

How can an investor register for OTM?

Here's how to set up an OTM on any investment platform in 7 simple steps:

Step 1: Access your investment platform

Visit the website of the mutual fund house or investment platform where you intend to start your SIP.

Step 2: Find the autopay option

In the profile section, look for options like 'Autopay' or 'Establish Autopay'.

Step 3: Choose your bank and account

Pick the bank and the primary savings account from which you want the SIP amount to be automatically withdrawn.

Step 4: Verify with OTP

An OTP will be sent to your registered mobile number. Use this to confirm your bank account.

Step 5: Additional verification

Further, validate your bank account using either your debit card details or net banking credentials.

Step 6: Final confirmation

You'll be directed to your bank's website for final validation. After confirming, you'll return to the mutual fund house's website.

Step 7: Completion

Once you've verified the OTM details, the process is finished. Your SIP investments are now automated, freeing up your time and effort.

If you decide that you no longer need the OTM, cancelling it is straightforward. You can easily disable the autopay feature from the app or the investment platform. The cancellation will be effective within 24 hours or more, depending on your bank and online discount broker.

Wrapping up: Key points to remember

• OTM automates your SIP contributions by directly debiting funds from your bank account, providing a streamlined investment experience.
• To initiate a one-time mandate SIP, you'll need your KYC documents, bank details, and a completed SIP registration form.
• OTM not only saves you time but also reduces transaction fees, thereby improving your investment process.

For an even easier way to manage your OTM and SIPs, download our mobile app. It offers a streamlined experience that makes investing effortless.