📄What is a One-Time Mandate in Mutual Funds?

A One-Time Mandate (OTM) is an authorization provided by an investor to their bank, allowing mutual fund companies to automatically debit a certain amount from their bank account. The main purpose of OTM is to simplify and streamline the investment process by removing the need for the investor to manually approve each transaction.

Once an investor registers for an OTM, they don't need to sign or authorize transactions repeatedly. This mandate allows mutual fund investors to carry out their transactions with ease, making both one-time investments and systematic investments simpler.

The OTM is typically registered with a bank account through a mandate form that is signed and submitted by the investor to the fund house. Once approved, it facilitates future mutual fund transactions, such as purchases, systematic investment plans (SIPs), or lump sum investments.

When is a One-Time Mandate Used?

OTM is commonly used in the following scenarios:

1. Systematic Investment Plans (SIP): One of the most popular uses of an OTM is for SIPs. When an investor opts for an SIP, they commit to investing a fixed amount periodically (usually monthly). With the OTM in place, the agreed SIP amount is automatically debited from the investor’s bank account on the due date without the need for additional authorization.

2. Switches between Funds: If an investor wants to switch from one mutual fund to another within the same fund house, the OTM can facilitate this switch, ensuring that any new investments or redemptions are debited or credited seamlessly.

3. Additional Purchases: Once an investor has an OTM in place, they can make additional investments in their existing funds with just a few clicks online. The OTM simplifies the process by eliminating the need to go through payment gateways or fill out payment forms for every transaction.

What is ₹100,000 in One-Time Mandate?

When you register for an OTM, you can set an upper limit on the amount of money that can be debited from your bank account. For example, many investors opt for a limit of ₹100,000 in their one-time mandate. This means that the mutual fund company is authorized to debit up to ₹100,000 per transaction, without exceeding this limit.

This upper cap ensures that the investor remains in control of how much can be debited at one time. However, this limit doesn’t mean that ₹100,000 will be debited every time; rather, it’s the maximum permissible amount that can be withdrawn in a single transaction.

This feature ensures that even large transactions, such as lump-sum purchases or several SIPs combined, can be processed seamlessly without going beyond the pre-defined limit.

Benefits of Setting a Limit

1. Control Over Transactions: Setting a limit ensures that no unauthorized or unintended large withdrawals occur. If the fund house or investor tries to debit an amount higher than ₹100,000, the transaction will fail, safeguarding the investor’s account from accidental or erroneous debits.

2. Flexibility for Future Transactions: A higher limit, like ₹100,000, allows the investor to make larger investments in the future without the need to re-authorize the OTM for every transaction. This makes it easier to make lump-sum investments whenever the market conditions are favorable.

3. Security and Peace of Mind: With an upper limit, investors can feel secure knowing that their bank account won’t be depleted unexpectedly. This cap gives a sense of control while still offering the convenience of automatic payments.

Conclusion

The One-Time Mandate in mutual funds is a convenient tool for investors to automate and simplify their investment journey. It ensures that investors can execute their SIPs and other transactions seamlessly without having to approve payments each time.

The ₹100,000 limit, or any other limit set by the investor, is there to provide flexibility, security, and peace of mind. It ensures that transactions can be processed efficiently while maintaining control over the maximum amount that can be debited from the bank account. Overall, OTM enhances the investing experience, making it more efficient and hassle-free.