What is One Time Mandate (OTM) in Mutual Funds?

In recent years, more and more households have been investing in mutual funds, with the total reaching a record ₹1.8 trillion in 2022-23. A big reason for this growth has been the rise of Systematic Investment Plans (SIPs), which offer a simple and disciplined way to invest over time. Introducing the One Time Mandate (OTM) has further simplified these investments.

But what exactly is OTM in mutual funds and how does it work? Let’s break it down and take a closer look!

What is Mandate in Mutual Funds?

A mandate in mutual funds is an instruction an investor gives to their bank or payment system that authorises automatic payments for mutual fund investments. There are two main types of mandates commonly used in mutual funds: 

One-Time Mandate (OTM)

An OTM in mutual funds is a pre-authorisation you give to your bank to debit your account for recurring payments automatically. It is helpful for services that require regular payments, such as insurance premiums, subscriptions, or SIPs. The OTM lasts for a set period or a fixed number of payments, after which it expires unless renewed.

Recurring Mandate

A recurring mandate is an automated payment according to a fixed schedule. For example, biller systems use recurring mandates to automatically process regular payments, like utility bills or monthly subscriptions. The payment continues indefinitely until you choose to cancel it.

Thus, the main difference between a one-time mandate (OTM) and a recurring mandate is that an OTM is a one-off authorisation for a fixed period, while a recurring mandate is an automated payment that can last indefinitely.

What is Mandate Amount in SIP?

The mandate amount in SIP refers to the fixed amount an investor agrees to invest regularly in a mutual fund via a Systematic Investment Plan (SIP). This amount is set up when the SIP is initiated and is debited automatically from the investor’s bank account at agreed intervals (e.g., monthly). The mandate amount is the sum that will be transferred to the mutual fund without requiring approval for each transaction.

For example: If you set up a monthly SIP of ₹5,000, then ₹5,000 is the mandate amount. Your bank will automatically deduct this amount from your account and invest it in the mutual fund on the scheduled date.

What are the Benefits of One Time Mandate?

The most basic benefit of having a mandate is that it automates the investment process. The following is a detailed overview of the overall benefits of One Time Mandate:

• Convenience: Once activated, the OTM will auto-approve each SIP payment. This eliminates the need to remember payment dates or manually transfer funds.
• Automation: The OTM automates the entire payment process. It helps investors stay disciplined, especially in long-term SIPs in mutual funds.
• Time-saving: OTM saves time. It removes the need to authorise each transaction manually. It reduces admin work and makes investing simpler.
• Guaranteed Investments: An OTM guarantees regular SIP or lump sum investments. This helps the investor ensure that all investments are made on a set frequency without their manual intervention.
• Transparency: Investors can track and view their mandates. This includes the amount, frequency and mutual fund being invested in. This provides clarity and control over their investments.

It ensures payments are made on time, without manual work from the investor after setup.

What is the Maximum Mandate Amount?

The maximum mandate amount meaning is the highest limit an investor can set for a mandate, whether for SIPs or lump sums, within a specific timeframe. This limit is typically established by the bank or payment gateway and is influenced by the account balance and regulatory constraints set by financial institutions or the government.

For instance, a bank might impose a maximum mandate amount of ₹1 lakh for an individual investor during a specific period. If an investor attempts to set a mandate that exceeds this limit, they will not be able to authorise the payment unless they modify the amount.

Understanding the maximum mandate amount is essential to prevent payment failures, particularly with recurring SIPs or substantial lump sums. Investors should ensure that their linked bank accounts have sufficient funds to cover the mandated amount.

How to Set Up a One Time Mandate (OTM) in Mutual Funds?

Setting up an OTM is straightforward. Many mutual fund platforms, including online portals and apps, allow investors to do this directly. Here’s a step-by-step guide on how to establish an OTM for mutual fund investments:

1. Select the Mutual Fund Scheme: Choose the mutual fund scheme you want to invest in (e.g., equity, debt, hybrid funds).
2. Decide the Investment Amount: Determine the amount you wish to invest through the One Time Mandate, whether for a lump sum or a SIP.
3. Complete the Mandate Form: The platform will prompt you to fill out an online mandate form during the investment process. You will need to enter your details.
4. Authenticate the Mandate: You may need to verify the mandate. This can be done using an OTP or a physical bank signature.
5. Confirmation: After the mandate is set up, you will get a confirmation. The bank will then start debiting the specified amount from your account at the scheduled frequency.
6. Track Mechanism: Investors can track their OTM status via the mutual fund platform or their bank’s net banking. If necessary, mandates can be modified or cancelled.

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Before You Go

The OTM in mutual funds automates investment management. It offers investors a simple and efficient solution. OTM streamlines the investment process for both SIPs and lump-sum investments. This helps investors achieve their financial goals with ease. However, being aware of your financial standing is highly important before going for any financial investments.

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FAQs on One Time Mandate (OTM) in Mutual Funds

Is One Time Mandate in mutual funds available for all?

Yes, the OTM facility is available to most mutual fund investors. But it is subject to certain conditions. Investors must link a bank account to their mutual fund platform. They must also complete verifications, like KYC (Know Your Customer). Also, the bank or gateway must 

support the OTM for mutual funds.

Can the One Time Mandate be modified?

Yes, the One Time Mandate (OTM) can be modified. To change the mandate’s amount, frequency, or details, update it via your mutual fund platform. Or contact the bank or payment provider. Some platforms let investors change mandates via their websites or apps.

Who is eligible to avail of the One Time Mandate facility?

All individual investors can utilise the One Time Mandate facility if they meet the following criteria:

• The investor has completed the KYC (Know Your Customer) process with the mutual fund house.
• The investor has a bank account that supports the OTM facility.
• The mutual fund house or platform provides the OTM facility for investment, as not all mutual funds may offer this option.