What Is One Time Mandate (OTM) In Mutual Funds?

What Is One Time Mandate (OTM) In Mutual Funds?

One-time mandate, or OTM for short, is a convenient feature offered by mutual fund companies and investment platforms. It's like giving your bank a standing instruction to automatically transfer a fixed amount from your account to your mutual fund investments regularly. The best part? You only need to set it up once, and it automatically takes care of your investments.

Think of OTM as a smart assistant for your investments. Once you set it up, it ensures that your money moves from your bank account to your chosen mutual fund scheme without you having to remember or do anything. This way, you don't miss out on your investment schedule, even if you're busy or forget.

OTM is particularly useful for SIPs, where you invest a fixed amount regularly. It saves you the trouble of manually transferring money each time, making your investment process hassle-free and consistent.

How Does OTM Work?

Let's break down how OTM works with a simple example. Imagine you want to invest ₹2,000 every month in a mutual fund through an SIP. Here's how OTM would make this process smooth:

• Setting up: You set up an OTM with your bank, telling it to transfer ₹2,000 to your chosen mutual fund on the 5th of every month.
• Automatic transfers: Once set up, your bank will automatically debit ₹2,000 from your account on the 5th of each month.
• Investment: This money is then credited to your mutual fund account, purchasing units of the scheme at that day's price.
• Repeat: This process repeats each month without you having to do anything.

The key thing to remember is that you need to have enough money in your account on the transfer date. If your account doesn't have sufficient funds, the transfer won't happen, and you might miss that month's investment.

Key Features Of OTM

OTM comes with several features that make it a popular choice among mutual fund investors:

• One-time setup: As the name suggests, you only need to set it up once, and it continues to work for the specified duration.
• Flexibility: You can set the amount, frequency (monthly, quarterly, etc.), and mandate duration according to your preference.
• Upper limit: You can set a maximum limit for the mandate, ensuring that no amount higher than what you've authorized is debited.
• Multiple fund houses: One OTM can be used for investments across different mutual fund companies, saving you the hassle of setting up separate mandates.
• Easy modification: If your financial situation changes, you can easily modify or cancel the OTM.

These features make OTM a versatile tool that adapts to your investment needs while keeping the process simple and automated.

Advantages Of OTM In Mutual Funds

Using OTM for your mutual fund investments comes with several benefits:

• Convenience: Once set up, you don't have to worry about remembering to make regular investments. It's all automatic.
• Discipline: OTM helps you stick to your investment plan by ensuring regular, timely investments.
• Avoiding missed opportunities: Regular, automated investments mean you don't miss out on potential market ups due to forgotten or delayed investments.
• Time-saving: No need to log in to your account or visit a bank for each investment. OTM does it all for you.
• Flexibility: You can easily modify or cancel the OTM if your financial goals or situation changes.
• Cost-effective: Most banks and mutual fund houses offer OTM services for free or at a minimal cost.

These advantages make OTM an excellent tool for new and experienced investors who want to simplify their investment process and maintain discipline in their financial planning.

Process Of Setting Up One Time Mandate (OTM)

Setting up an OTM is a straightforward process. Here's a step-by-step guide:

• Choose your platform: You can set up the OTM through your bank or a mutual fund platform.
• Provide details: You'll need to provide information such as your bank account details, the amount you want to invest, and the frequency of your investments.
• Verification: The bank or platform will verify your details, usually through a one-time password (OTP) sent to your registered mobile number.
• Authorization: You'll need to authorize the mandate digitally or by signing a physical form, depending on your chosen method.
• Confirmation: Once set up, you'll receive a confirmation from your bank or the investment platform.

Remember, while the online process is usually quicker, some banks might require you to visit a branch or submit physical documents for verification. The exact process might vary slightly depending on your bank and the investment platform you're using.

Transactions Covered Under OTM

OTM in mutual funds isn't just limited to SIP investments. It can be used for various transactions:

• Systematic Investment Plans (SIPs): The most common use of OTM, where a fixed amount is invested regularly.
• Lump sum investments: Some platforms allow you to use OTM for one-time, larger investments.
• Systematic Transfer Plans (STPs): OTM can facilitate regular transfers between mutual fund schemes.
• Systematic Withdrawal Plans (SWPs): If you're in the withdrawal phase, OTM can automate regular redemptions from your mutual fund investments.
• Top-up SIPs: OTM can automatically increase your SIP amount at regular intervals.

This versatility makes OTM a useful tool for various stages of your investment journey, from building your corpus to managing your withdrawals.

How To Automate An SIP?

Automating your SIP using OTM is a simple process:

• Choose your mutual fund: Select the scheme you want to invest in.
• Decide on your investment details: Fix the amount you want to invest and how often (monthly, quarterly, etc.).
• Set up the OTM: Follow the earlier process to set up the OTM with your bank or investment platform.
• Link the OTM to your SIP: Choose the OTM payment option when starting your SIP.
• Start your SIP: Once everything is set up, your SIP will start automatically on the date you've chosen.
• Monitor: While the process is automated, monitoring your investments and ensuring the transfers are happening as planned is good.

Remember, automation doesn't mean you should forget about your investments entirely. A regular portfolio review is still important to ensure your investments align with your financial goals.

Conclusion

A one-time mandate (OTM) is a powerful tool that simplifies investing in mutual funds. It brings convenience, discipline, and consistency to your investment journey. By automating your investments, OTM helps you stick to your financial plans and potentially benefit from long-term wealth creation. While it's a great tool, remember to review your investments regularly and ensure they align with your changing financial goals.