What is Mandate Amount in SIP and Who Should Opt for It?

Systematic Investment Plans (SIPs) make mutual fund investing simpler by allowing you to invest a chosen amount at regular intervals. A one-time mandate (OTM) can make this process even easier. Despite its name, an OTM is not a one-time investment. It is an instruction that you register once with your bank, authorising automatic debits up to a specified limit. Once the mandate is linked to an SIP, the instalment amount is debited on each scheduled date without requiring separate approval every time. Read on to understand how an OTM works and how you can use it to start an SIP.

What is mandate in mutual fund

A mandate is an instruction that authorises your bank to debit money from your account for mutual fund transactions, subject to a specified limit and other conditions. When linked to an SIP, it enables the scheduled instalments to be debited automatically without requiring you to approve each payment separately.

The mandate must be registered and approved by your bank before debits can begin. Depending on the available facility, registration may be completed digitally through methods such as net banking or Aadhaar-based authentication. A mandate can also be cancelled, while changes may require a fresh registration.

What is one time mandate

A mandate created for a particular SIP is generally used only for the instalments under that SIP. A one-time mandate (OTM), in contrast, is registered once and can be used for multiple eligible transactions, such as additional SIPs and lumpsum purchases, subject to its approved limit and the AMC’s or platform’s rules.

The term “one-time” refers to registering the authorisation once, not to making only one payment. You must still register an SIP or place a purchase request before any money is debited. The OTM simply removes the need to provide fresh bank details or set up a new payment mandate for every eligible transaction.

What is NACH and how is it related to OTM?

NACH, or the National Automated Clearing House, is a centralised payment system operated by the National Payments Corporation of India (NPCI) for high-volume interbank transactions that are recurring or periodic. Before NACH, banks would use the Electronic Clearing System (ECS) for recurring payments. ECS operated through multiple regional clearing systems. NACH began replacing ECS mandates in 2016, bringing processes under a common nationwide framework and making them more standardised and easier to manage across banks.

In mutual funds, an OTM is registered and processed through the NACH system. The OTM records your authorisation and the maximum amount that may be debited, while NACH enables the AMC or its registrar to send the debit request to your bank when an SIP instalment or another authorised transaction becomes due. Simply put, the OTM is your permission and NACH is the system that carries out the payment.

How to automate your SIP payments

SIP payments can generally be automated through either of the following routes:

Bank mandate: You authorise your bank to process debit requests for your SIP instalments. A bank mandate may be registered through a physical NACH form or digitally through eNACH.

UPI AutoPay: You create a recurring payment mandate through a UPI app linked to your bank account. Once approved, the SIP amount is debited automatically on the scheduled date. Available limits and authentication requirements may vary.

In either case, you will need to specify or approve a maximum mandate amount and authenticate the request. This maximum is only the debit limit; your actual deduction will be based on the SIP instalment you have selected. A sufficiently high limit can give you room to increase your SIP or start another eligible transaction later without registering a fresh mandate.

Steps involved for online process:

The exact process may differ from one mutual fund company to another, but here are the steps typically involved:

Select fund: Choose a mutual fund scheme that matches your financial goals, risk appetite, and time horizon.
Set up your account: if you are a new customer, register with the asset management company with your name, PAN, date of birth and other basic details.
Enter bank information: This would include your account number, IFSC code, account type.
Enter SIP details: Specify your SIP amount, frequency, and starting date.
Choose your method: Decide between UPI or bank mandates.
Authorise the payment: Approve the mandate through your bank’s website or UPI app.

Offline process:

You can get the OTM form from the fund house’s website. You will be required to fill in the following details:

Bank account information, including bank name, account number and IFSC code.
Your name as per bank documents. Some forms may also ask for your Permanent Account Number or PAN, registered mobile number, residential address or other personal information.
Your SIP amount, frequency and mandate limit.
The start and stop date for the SIP. If you have planned a fixed number of investments, you can enter the start and end date of your SIP. Or you can choose the ‘until I Stop’ option if you plan to stay invested for an undefined period.

Once this is done, sign and submit the form to the asset management company.

Read Also: What is OTM in mutual funds?

Benefits of one-time mandate in SIPs

A one-time mandate (OTM) simplifies SIP management, facilitates consistent investments, and promotes disciplined financial habits reliably. Some of the benefits are:

Hassle-free: OTM automates SIP payments, removing the need for manual transfers or remembering payment dates.
Time-saving: Once registered, the process operates seamlessly, reducing the need for active involvement in managing monthly payments.
Consistent contributions: OTM facilitates timely payments, preventing disruptions in investments due to forgetfulness or busy schedules.
Disciplined investing: Regular payments optimises the benefits of SIPs.
Predictable deductions: Scheduled SIP deductions help plan cash flow more effectively and avoid surprises.
Prioritising investments: Automating contributions ensures investment goals are met without being derailed by discretionary spending.

Who should opt for a one-time mandate?

An OTM may be suitable for:

Investors starting an SIP, as it helps automate instalments on the scheduled dates.
Individuals planning multiple SIPs, since an existing OTM may be used for additional SIP registrations with the same AMC or platform.
Long-term investors who wish to continue investing regularly without completing repeated payment authorisations.
Investors who value convenience, as the mandate reduces the need to manually approve each SIP instalment.

How to modify, increase or cancel an OTM?

The exact process may vary slightly across AMCs, registrars, banks, and online investment platforms, but it generally involves submitting a request through the relevant service channel.

Common options include:

Increase the mandate limit: If your future SIP instalments or other eligible investments are expected to exceed the existing limit, you may register a new OTM or submit a modification request, depending on the facility offered by the AMC or platform.
Update bank account details: If you wish to use a different bank account, you will generally need to register a fresh OTM linked to the new account and complete the required authentication.
Cancel the OTM: You may submit a cancellation request through the AMC, registrar, distributor, or online investment platform. Some banks may also provide this facility through their net banking portal.

Safety and security of OTM for SIP Investments

OTMs are processed through the National Automated Clearing House (NACH) system, regulated by the Reserve Bank of India.

Investors also set a maximum debit amount and a validity period while registering this mandate to ensure more control over their transactions.

Both banks and mutual fund houses use encrypted channels to process all payments. Once the OTM is registered and approved by the investor, SIP debits take place automatically within the authorised limit and validity. No money can be debited beyond the approved amount or without a valid mandate in place. Moreover, in case of any issue, investors can modify or cancel their OTM instructions anytime. This makes OTM not only convenient but also a reliable option for managing SIP investments.

Conclusion

One-time mandates make the process of investing in mutual funds seamless and easy. The auto-deduction of money from your bank account saves you the trouble of having to remember your due date or initiate a transfer or cheque payment for each instalment. Depending on your preference, you may choose the physical NACH mandate option or set it up online. Additionally, using an SIP calculator can help you plan your investments effectively. The tool can help you determine a suitable investment amount and horizon based on your expected returns and financial goals. When registering the mandate, you can also consider doing a top up SIP, where your SIP contributions increase by a percentage set by you at regular intervals (semi-annually, annually etc). A top up SIP calculator can help you visualise the growth potential of this investment approach.

FAQs

What documents are needed for a one-time mandate SIP?

You typically need KYC documents, bank details, and a filled SIP registration form to set up a one-time mandate SIP.

Can I change the investment amount in a one-time mandate SIP?

Usually, the investment amount is fixed for a one-time mandate SIP. However, some funds might allow you to adjust it under certain conditions. Before you invest, you can take the help of an SIP calculator to identify an investment amount that may be suitable for you based on your goals and investment horizon.

Can I start SIP without autopay?

Yes, you can start a SIP without autopay by making manual payments for each installment through net banking, UPI, or cheques. However, this method requires you to remember and ensure timely payments to avoid missed contributions,

Is there a one-time investment in SIP?

No. A “one-time investment in SIP” does not exist, as SIPs involve systematic, recurring investments over time. For single, large investments, the correct term is a “lumpsum investment,” which differs from SIPs in strategy and risk exposure.

What is OTM in SIP? How can I start an SIP with a one-time mandate?

To start an SIP with a One-Time Mandate (OTM), select a mutual fund scheme aligned with your financial goals. Then, choose an investment route – you can go through a distributor, an aggregator, or invest directly through the mutual fund company.

Register and provide bank details to authorise the OTM, either through the platform or your bank, by specifying SIP details like amount, frequency, and start date. After setting up the OTM and creating your SIP, ensure sufficient funds in your account for scheduled deductions and review your investments periodically for adjustments.

What is mandate in SIP? Is a one-time mandate required for all SIP investments?

A One-Time Mandate (OTM) may not be required for all SIP investments but is commonly chosen by investors owing to its convenience.

Can I cancel my one-time mandate for SIP?

Yes, you can cancel your One-Time Mandate (OTM) for SIP investments through multiple methods. You can cancel it through your bank’s net banking portal or by visiting the bank branch and submitting a written request. Alternatively, you can cancel it through the investment platform or mutual fund house by contacting their customer service or checking if the platform offers an option for cancellation directly.

Is a one-time mandate safe for SIP investments?

A one-time mandate (OTM) is generally safe for SIP investments when used correctly and done through an authorised and reliable platform.

What documents are needed to start a SIP with OTM?

To start a SIP with OTM, the following documents may be required:

Identify documents: Full name, date of birth, PAN, contact information (phone, email), and address proof (Aadhaar, driving license, etc.).
Bank account details: Bank name, account number, IFSC code, and account holder’s name.
SIP details: Chosen mutual fund scheme, SIP amount, investment frequency (monthly/quarterly), and start date.

Always verify the exact documents needed with your chosen investment platform or mutual fund house.

How long does it take to activate an SIP with a one-time mandate?

The activation time for a SIP with a One-Time Mandate (OTM) depends on the processing time your bank and the platform take. Typically, it can take a few business days to a couple of weeks for the SIP to be fully activated. You’ll receive confirmation once the OTM is registered.

How can a CAGR calculator help me track my SIP’s long-term growth?

SIPs involve multiple transactions over time, which makes XIRR (Extended Internal Rate of Return) a more suitable metric to assess returns. However, Compound Annual Growth Rate (CAGR) can still be used to get a rough estimate, taking into account your total invested value and final corpus size. It may not account for the actual growth of each instalment, but it can give you an overall idea of investment performance. You can use a CAGR calculator for help with this process.

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