What is One Time Mandate(OTM) in mutual fund SIP and Its Benefits

Better protection against market volatility, affordability, and high earnings even during market lows are some of the major reasons investors choose to invest in Systematic Investment Plans (SIPs). However, selecting the desired scheme and making the first payment is easy, but your work isn't done there, that is until you opt for a One-Time Mandate or OTM. Essentially, this is an auto-pay option for an SIP through an eNACH mandate.

An OTM in SIP investing is a one-time registration process in which you instruct your bank to deduct a specific amount from your savings account and credit the same to your SIP portfolio at regular intervals. Once the OTM has been activated, your monthly SIP payments will be automated, relieving you of the task of transferring money ever so often.

What is One Time Mandate (OTM) in mutual fund SIP?

An OTM in SIP investing is a one-time registration process in which you instruct your bank to deduct a specific amount from your savings account and credit the same to your SIP portfolio at regular intervals. Once the OTM has been activated, your monthly SIP payments will be automated, relieving you of the task of transferring money ever so often.

Benefits of One Time Mandate

• No worries regarding payment lags

Also known as the 'e-wallet of investing,' the One-Time Mandate is a safe process. Plus, being advanced and wholly digital, you will hardly (if ever) face any payment failures. This is way more convenient than having to fill out endless cheques or auto-debit instruction forms.

• Secure process

As stated earlier, SIP OTM is one of the safest ways to invest. You will be asked for information such as your bank account details and mutual fund details which makes the process secure and quick. OTM spares you time otherwise wasted in going through the same payment formalities over and over again.

Additional Read: Why are SIPs an Ideal Choice for the First-time Investor?

• No cap on the number of SIPs

With a single One-Time Mandate registration, you can automate payments for multiple SIPs. Though there is no cap on the number of SIPs that can be registered with a single OTM, you need to ensure that the aggregate value of all SIPs combined falls well within the specified limit.

• Instils financial discipline

Financial success isn't magic but engineering. It takes keeping your long-term goals always at the forefront, which requires tremendous willpower and effort. Sometimes, bending your will to do what's needed can feel like a losing battle. Since OTM automates payments at periodic intervals, it naturally instils a sense of financial discipline over time.

• Simple registration

Registering for an OTM in SIP is easy and quick. All you need to do is duly fill and submit an OTM form with your signature agreeing to the Terms and Conditions of this facility. It takes a maximum of 10 days for successful One-Time Mandate registration. An OTM can be set up for both new lumpsums and fresh SIPs.

Additional Read: Timed lump sums vs SIPs: What works better?

How to set up e-mandate for SIP

1. Download the Tata Capital Moneyfy app
2. Enter your details – PAN, email id, etc. – and choose your bank
3. Next, choose the mandate amount and the period for which you want it to be valid
4. Now, authenticate your Aadhaar details

It will take a couple of working days for the e-mandate to become effective.

How OTM in SIP works?

Here's how the one-time mandate works in SIP-

1. Use a SIP calculator to determine your investment amount, investment return, and expected returns based on your investment goals.

2. Compare different SIPs based on your calculations and choose the best SIP plans for your investment. 

3. Set up the OTM facility with your bank by specifying the SIP investment amount and the desired investment frequency. The specified amount will be deducted automatically from your account. 

In conclusion

The one-time mandate facility offers a disciplined approach to investing in mutual funds through SIPs. With OTM, you can ensure consistent investing towards your financial goals through automatic money deductions, thus streamlining your investments.

Do you also want to start your SIP investment journey? Download Tata Capital's SIP app and get the ball rolling! Use the SIP calculator to determine the amount you'll need to invest to achieve your goals, get personalised fund recommendations for your portfolio, compare between funds, and start your SIP journey with as little as Rs.500.

Frequently Asked Questions(FAQs)

What is a one-time mandate for SIP?

A one-time mandate (OTM) for SIP is an authorisation that allows automatic debits from your bank account for future SIP payments, streamlining investments without needing approval for every transaction.

Is one-time SIP better?

One-time SIP can be better if you have a larger sum to invest and want to capitalise on a market uptrend. However, monthly SIPs offer the advantage of rupee cost averaging, reducing risk by spreading out investments over time. However, whether it's "better" depends on individual financial goals, liquidity preferences, and market conditions.

Which is better, OTM or Biller, for SIP? 

OTM is often preferred for its convenience and faster setup. Billers, however, may offer more control over individual payments. Choosing depends on ease of use versus flexibility.

Are OTM options more profitable? 

OTM options don't impact profitability; they are purely a method of automating payments. SIP returns depend on market performance and fund selection, not on the payment mechanism used.