If you had to choose between automating your investments or manually initiating them through cumbersome processes, what would you choose? Disciplined investors would, obviously, choose automation.
Automating your mutual fund investments can save you time, effort, and money! There are multiple ways to do this, and a One Time Mandate (OTM) is among them.
OTM in mutual funds ensures that your bank and the AMC are in sync to deduct timely payments towards your lump sum or SIP investment.
In this article, we’ll explore what is OTM in mutual funds and why it matters for you.
What is OTM in Mutual Funds?
OTM in Mutual Fund stands for ‘One Time Mandate’. It is a one-time registration process where you authorize your bank to deduct a certain amount from your savings account towards the purchase of units in a particular scheme of a mutual fund.
Opting for an OTM simplifies the investment process through automation.
Once you set up the OTM, the bank will automatically debit a fixed amount from your savings account at regular intervals and credit this amount to your Systematic Investment Plan (SIP) portfolio.
When is OTM Used for Mutual Fund Investments?
By now, you must have guessed some of the use cases of an OTM. It’s logical for scenarios like a SIP where you want a certain amount of money to be deducted periodically.
What about transfers or withdrawals in mutual funds? Read on to know more.
Used:
- SIPs: Regular, periodic deductions for systematic investment plans.
- Lump Sum: One-time deductions for lump sum investments.
Not Used:
- STPs: Systematic Transfer Plans involve transferring funds between mutual fund schemes periodically, requiring separate mandates.
- SWPs: Systematic Withdrawal Plans involve withdrawing funds from mutual fund investments periodically, also requiring separate mandates.
OTM is not applicable for STP and SWP because these plans involve regular and often varying transactions between different mutual fund schemes, each requiring separate authorization.
How to Register an OTM?
We’ve discussed that OTM simplifies your banking by allowing a one-time registration process.
This means you need to grant your bank permission to withdraw funds from your account up to a specified limit.
Here’s a quick guide to registering for OTM:
- Bank Account Details: Enter your bank information, including bank name, branch, account number, type, and IFSC code. Remember, only one bank account can be used for OTM registration.
- Personal Information: Share your personal information, such as name, date of birth, PAN number, address, phone number, and email. If it’s a joint bank account, include details for all account holders.
- Set Mandate Limit: Choose the maximum amount for debits. Transactions exceeding this limit will not be processed.
- Investment Details: Provide your folio number and select either a fixed amount, ideal for regular SIP investments, or a maximum amount for one-time lump sum payments. Additionally, specify the frequency of debits for your funds, such as monthly, quarterly, half-yearly, or as required.
- Signature: All account holders must sign the OTM form, ensuring the signatures match those on file with the bank.
After you submit the form, the bank will handle your request. Once it’s processed, you’ll be ready to utilize the OTM facility for investing in mutual funds.
By the way, OTM is available on Dhan as AutoPay for SIP and Lump Sum investments!
Benefits of OTM in Mutual Funds
OTM in mutual funds offers several benefits:
1. Simplicity
The simplicity of One Time Mandate (OTM) in mutual funds lies in its easy registration process.
Once you register for OTM, you authorize your bank to debit an amount up to the limit set by you for investing in mutual funds.
This process is done only once, making it simple and straightforward.
2. One-time Process
You only need to complete it once. After registering for OTM, you give your consent for automatic and regular money transfers from your bank account to your mutual fund investments for a specified time frame.
This means you don’t have to manually approve each transaction, making the investment process smoother and more convenient for you.
3. Versatility
OTM in mutual funds is versatile as it works for lump sum and SIP transactions.
Whether you want to invest a large amount at once (lumpsum) or make regular, smaller investments (SIP), OTM facilitates both.
This flexibility allows you to choose the investment method that best suits your financial goals and risk tolerance, making OTM a versatile tool for mutual fund investments.
4. Efficiency
The efficiency of OTM in mutual funds comes from its ability to automate transactions.
Once you set up OTM, it takes care of your investments in the selected scheme until your financial goal is achieved.
This means you don’t have to manually transact each time, saving you time and effort.
OTM ensures your investments are made regularly and efficiently without requiring constant attention from you.
5. Timeliness
OTM in mutual funds offers timeliness. If you start a Systematic Investment Plan (SIP) via OTM, there are higher chances of unit allotment on the same day.
This is because the funds are released on the same day of the transaction.
This timeliness ensures that your investment is processed quickly, allowing you to potentially benefit from market movements and making your mutual fund investments more efficient.
6. Hassle-free
Finally, OTM in mutual funds makes investments hassle-free. By taking one-time consent from investors, OTM automates their investments for the given time frame.
This means you don’t have to worry about remembering to make your investments or manually making each transaction.
OTM takes care of all this for you, making your mutual fund investments a hassle-free experience and allowing you to focus on other important aspects of your journey towards financial freedom.
Conclusion
Grasping the concept of Other Than Mutual Funds (OTM) is essential for your investment journey.
It broadens your options, offering the potential for greater diversification and returns. Remember to research and consult with financial experts before diving in.
