OTM in Mutual Fund

OTM, or One Time Mandate, is a one-time registration enabling investors to authorize their bank to seamlessly debit a specified amount from their account, simplifying investments in SIPs (Systematic Investment Plans) with convenience and efficiency.
One Time Mandate in Mutual Funds
4 mins read
16-January-2024

The acronym OTM stands for "One Time Mandate," representing a single registration procedure for mutual fund investors. Through this process, investors grant their bank authorisation to execute debits from their account, up to a specified limit, as per requests made by the mutual fund company.

To activate a One-time Mandate (OTM) for mutual funds, investors must complete the OTM registration form and submit it either at a designated Investor Service Centre or through their financial advisor. Existing investors should ensure that their folio number is included and that the form is signed in accordance with their bank documents. This streamlined process enables convenient and secure authorization of transactions related to mutual fund investments.

Let’s comprehensively understand the aspects of One-time Mandate (OTM) in mutual funds. We will discuss what OTM entails, its operational mechanics, associated advantages, the types of transactions it facilitates, a step-by-step guide on establishing OTM for mutual fund SIPs, and the eligible schemes under OTM.

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

A one-time mandate (OTM) is a convenient feature offered by mutual fund companies and investment platforms. It works like a standing instruction to your bank, allowing automatic transfers of a fixed amount from your account to your mutual fund investments on a regular basis. The best part? You only need to set it up once, and it will handle future transactions for you.

Think of OTM as your investment assistant. Once activated, it ensures that your funds move from your bank account to your selected mutual fund without any extra effort on your part. This guarantees that your investment schedule stays on track, even when you're busy or forget.

OTM is especially useful for SIPs (Systematic Investment Plans), where you invest a set amount regularly. It eliminates the need for manual transfers, making the investment process hassle-free and consistent.

How does OTM work?

Let's see how a one-time mandate (OTM) simplifies investing in mutual funds through a real-life scenario.

Imagine you're looking to build long-term wealth through a mutual fund. You choose a Systematic Investment Plan (SIP) in an equity-oriented fund to invest Rs. 5,000 monthly for 10 years. To ensure consistent contributions and avoid missing payments, you decide to set up an OTM online.

Here's how it works:

  1. Setting up the OTM: You access your mutual fund investment platform and initiate an OTM for your chosen SIP. You instruct your bank to automatically transfer Rs. 5,000 from your account to the equity fund on the 1st of every month for 10 years, totaling 120 automated payments.
  2. Automated SIP contributions: Once registered, your bank will automatically debit Rs. 5,000 from your account on the 1st of each month and deposit it into your designated SIP account. This ensures a disciplined and hassle-free investment approach.
  3. Maintaining sufficient funds: It's important to remember that these automated debits rely on sufficient funds in your bank account. If your balance falls below Rs. 5,000 on the designated date, the OTM may fail, potentially incurring penalties from your bank. Therefore, maintaining adequate funds in your account on the payment date is crucial.

This example demonstrates how OTM streamlines SIP investments, ensuring consistent contributions towards your long-term financial goals.

Key features of OTM

OTM offers a range of benefits, making it a popular option for mutual fund investors:

  • One-time setup: As the name implies, you only need to set it up once, and it will automatically continue for the duration you specify.
  • Flexibility: You have the freedom to choose the investment amount, frequency (monthly, quarterly, etc.), and the mandate duration to suit your preferences.
  • Upper limit: You can set a maximum limit, ensuring that no amount beyond what you’ve authorized will be debited from your account.
  • Multiple fund houses: A single OTM can be used for investments in various mutual fund companies, eliminating the need to set up separate mandates.
  • Easy modification: If your financial situation changes, you can easily modify or cancel the OTM at any time.

Benefits of choosing OTM in mutual funds

Opting for OTM presents a multitude of advantages.

  1. Convenience and simplification: OTM streamlines the investment process by allowing investors to make payments seamlessly through their bank accounts without the hassle of repeated manual submissions.
  2. Efficient SIP setup: Investors opting for SIPs can initiate new plans effortlessly using the OTM facility, bypassing the need for providing bank details or submitting physical documents.
  3. Time-saving automation: OTM automates the investment experience, reducing the time and effort required for transaction-related formalities, making it an efficient choice for those seeking a hassle-free investing journey.
  4. Enhanced security: By registering for the OTM facility, investors enhance the security of their transactions, as it minimises the need for sharing sensitive information repeatedly, reducing the risk associated with manual intervention.
  5. Streamlined registration process: Investors enjoy a straightforward registration process for the OTM facility, making it user-friendly and accessible, even for those new to online investment platforms.
  6. Reduced documentation requirements: Choosing OTM translates to a reduction in paperwork, as investors can perform various transactions without the need for repetitive document submissions, contributing to a more eco-friendly and efficient investment process.
  7. Seamless management of multiple investments: OTM facilitates the efficient management of multiple investments, allowing investors to handle various mutual fund transactions through a unified and simplified platform.

Did you know? You can also get an estimate of the future value of your mutual fund investments by using the Bajaj Finserv SIP Calculator, eventually helping you to make informed decisions. 

What transactions can be done through the OTM facility?

Systematic Investment Plans (SIPs): The most common use of OTM, enabling automatic regular investments of a fixed amount.

  • Lump sum investments: Some platforms allow OTM to facilitate one-time, larger investments.
  • Systematic Transfer Plans (STPs): OTM can manage regular transfers between different mutual fund schemes.
  • Systematic Withdrawal Plans (SWPs): If you're in the withdrawal phase, OTM can automate regular redemptions from your mutual fund investments.
  • Top-up SIPs: OTM can automatically increase your SIP amount at set intervals, ensuring your investments grow with time.

How to set up a One Time Mandate (OTM) in Mutual Funds?

Setting up an One-Time Mandate (OTM) for investing in mutual funds is a straightforward process. Many mutual fund platforms, including online portals and mobile apps, allow investors to easily establish an OTM. Here’s how you can do it:

  1. Select the mutual fund scheme: Begin by choosing the specific mutual fund scheme you want to invest in. This could include equity funds, debt funds, hybrid funds, or any other type that aligns with your investment goals and risk tolerance.
  2. Decide the investment amount: Determine the amount you wish to invest through the OTM. You can choose to invest a lump sum or set up a Systematic Investment Plan (SIP), which involves investing a fixed amount at regular intervals.
  3. Complete the mandate form: The platform will guide you through an online mandate form where you will need to enter your details, such as the chosen fund, investment amount, payment frequency (if applicable), and bank account information.
  4. Authenticate the mandate: To verify the mandate, you might need to authenticate it through a one-time password (OTP) sent to your registered mobile number or by providing a physical bank signature.
  5. Confirmation: Once the mandate is set up, you will receive a confirmation message or notification. The bank will then start debiting the specified amount from your account according to the scheduled frequency (if applicable).
  6. Track mechanism: You can easily monitor the status of your OTM through the mutual fund platform or your bank's net banking portal. If necessary, you can modify or cancel the mandate as per your investment needs.

How to set up a one-time mandate (OTM) for mutual fund SIPs?

Registering a one-time mandate for your mutual fund SIP is a straightforward process, which you can conveniently do online through net banking or by providing your debit card details.

Here is a step-by-step guide to initiate the OTM registration:

  1. Visit the mutual fund house's website or an investment platform like the Bajaj Finserv platform.
  2. Navigate to your profile section and choose the 'autopay' or 'set-up autopay' option.
  3. Pick your bank and select your primary savings account for automatic deductions.
  4. An OTP will be sent to your registered mobile number. Enter the OTP to verify your bank account.
  5. Verify your bank account through either debit card details or net banking.
  6. You will be redirected to your bank's website to confirm the provided details.
  7. After confirming the OTM details and completing the process, you will be directed back to the mutual fund house's website.

What is the maximum mandate amount?

The maximum mandate amount refers to the highest permissible amount that an investor can set for a mandate, whether for recurring Systematic Investment Plans (SIPs) or one-time lump sum investments, within a specific timeframe. This limit is typically determined by the bank or the payment gateway and is influenced by factors such as the investor's account balance and regulatory constraints imposed by financial institutions or the government. If an investor attempts to set a mandate amount that exceeds this limit, the payment authorization will be unsuccessful unless the amount is revised accordingly.

Eligible schemes for OTM

The OTM facility is applicable to a wide range of mutual fund schemes available on the Bajaj Finserv platform. Whether it is equity funds, debt funds, or hybrid funds, investors can leverage the benefits of OTM across various schemes.

How to automate an SIP?

Automating an SIP through OTM is user-friendly. After successful registration, investors can set their SIP preferences, including the frequency and amount. The OTM ensures that these preferences are executed seamlessly at the scheduled intervals.

Drawbacks of One-Time Mandates

While OTMs offer convenience and automation, it's important to consider the following potential drawbacks:

  • Overdraft risk: If your bank account doesn't have sufficient funds on the scheduled debit date, it can lead to overdraft fees. Maintaining adequate funds is crucial.
  • Fixed debit amounts: OTMs typically involve fixed debit amounts, which might not be flexible enough to accommodate changes in your financial situation. Modifying the OTM might not be immediate if your financial circumstances change suddenly.
  • Bank charges: Some banks may impose charges for setting up or maintaining an OTM. While usually nominal, these charges can add up over time, especially if you have multiple OTMs.
  • Managing multiple mandates: If you have investments in multiple mutual funds, managing several OTMs can become complex. Keeping track of various debit dates and ensuring adequate funds for each mandate requires careful financial planning.
  • Inflexibility in investment strategy: Automating investments through OTMs can sometimes lead to a "set-it-and-forget-it" approach, potentially causing you to miss out on strategic investment opportunities that require timely action.
  • Impact on cash flow: Automatic debits through OTMs can impact your monthly cash flow, especially if you have fluctuating income or expenses. If not carefully managed, this can lead to liquidity issues.

Conclusion

In conclusion, the One Time Mandate (OTM) in Systematic Investment Plans (SIP) emerges as a game-changer in simplifying and streamlining the investment process for mutual fund enthusiasts. This innovative facility not only enhances the convenience of transactions but also significantly reduces the administrative hassles associated with regular SIP investments. By allowing investors to automate their SIP payments through a one-time setup, OTM brings forth efficiency and ease of use.

Investors now have the flexibility to initiate fresh lumpsum investments and set up new SIPs seamlessly, without the need for redundant paperwork or resubmitting bank details. The registration process, requiring just one-time documentation, ensures a swift and hassle-free experience. With added security measures such as OTP verification and bank account confirmation, OTM provides a reliable and secure platform for investors to manage their mutual fund investments effortlessly.

As financial landscapes evolve, tools like OTM play a crucial role in empowering investors, allowing them to take charge of their financial journey with confidence and convenience. In embracing the OTM in SIP, investors not only unlock a more streamlined investment experience but also pave the way for a future where mutual fund investments are more accessible and user-friendly.

To make an informed choice, you can visit the Bajaj Finserv Mutual Fund Platform and browse through over 1,000 mutual fund options. You can even compare different funds and select the fund that best aligns with your goals.

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Frequently Asked Questions

What is OTM full form in mutual fund?

OTM stands for One Time Mandate in mutual funds.

How OTM works?

OTM works by enabling investors to register once and automate their SIP transactions, eliminating the need for manual intervention.

Where is the OTM registered?

The OTM is registered on the Bajaj Finserv platform, providing a secure and streamlined experience.

Who is eligible to avail this facility?

All investors on the Bajaj Finserv platform are eligible to avail the OTM facility.

Is the OTM mandate registration at a scheme level or at a folio level?

The OTM mandate registration is at the Folio level, ensuring comprehensive coverage for all schemes within that folio.

How much time will it take to register the OTM?

The OTM registration process is quick and can be completed in a few simple steps, ensuring minimal time investment for investors.

Is OTM in mutual funds available for all?

The One Time Mandate (OTM) is available for all existing individual and non-individual investors who have a folio number. It streamlines mutual fund transactions, allowing quick SIP setup and reducing risks compared to the older ECS system.

Can OTM in mutual funds be modified?

One Time Mandate (OTM) in mutual funds allows automatic SIP investments. While you cannot modify an existing OTM, you can cancel the existing one and set up a new one with revised details if needed.

Can OTM in mutual funds get rejected?

Yes, One Time Mandates (OTMs) in mutual funds can get rejected. Reasons include incorrect details provided or if the investor’s bank is not part of the National Automated Clearing House (NACH).

What transactions can be done through the OTM facility in mutual funds?

The One Time Mandate (OTM) in mutual funds allows investors to set up recurring payments, such as Systematic Investment Plans (SIPs), within 2-3 days, compared to the older ECS system that took up to 30 days. The OTM eliminates the need for multiple cheques and minimises the risk of rejection due to signature mismatches.

How many SIPs can be registered with one OTM?

There is no limit to how many Systematic Investment Plans (SIPs) you can register under a single One Time Mandate (OTM). However, ensure that the aggregate value of all SIPs falls within the specified limits.

Which is better, OTM or Biller?

The choice between OTM (One Time Mandate) and Biller depends on your needs. OTM is ideal for automating single payments, making it convenient for one-time transactions. Biller, on the other hand, is better for managing recurring payments and invoicing, streamlining ongoing financial processes. Choose based on your payment frequency and requirements.

How do I stop OTM in mutual funds?

To stop OTM (One Time Mandate) in mutual funds, contact your bank or the AMC through whom you have bought the mutual fund. From there your AMC or Bank will guide you to carry out the steps to stop an OTM since the steps for stopping an OTM vary depending upon the bank, AMC or financial institution.

How do I activate OTM in mutual funds?

To activate an OTM for mutual funds with Bajaj Finserv, please follow the below-given steps:

  1. Visit the mutual fund house's website or an investment platform like the Bajaj Finserv platform.
  2. Navigate to your profile section and choose the 'autopay' or 'set-up autopay' option.
  3. Pick your bank and select your primary savings account for automatic deductions.
  4. An OTP will be sent to your registered mobile number. Enter the OTP to verify your bank account.
  5. Verify your bank account through either debit card details or net banking.
  6. You will be redirected to your bank's website to confirm the provided details.
  7. After confirming the OTM details and completing the process, you will be directed back to the mutual fund house's website.

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Bajaj Finance Limited (“BFL”) is an NBFC offering loans, deposits and third-party wealth management products.

The information contained in this article is for general informational purposes only and does not constitute any financial advice. The content herein has been prepared by BFL on the basis of publicly available information, internal sources and other third-party sources believed to be reliable. However, BFL cannot guarantee the accuracy of such information, assure its completeness, or warrant such information will not be changed. 

This information should not be relied upon as the sole basis for any investment decisions. Hence, User is advised to independently exercise diligence by verifying complete information, including by consulting independent financial experts, if any, and the investor shall be the sole owner of the decision taken, if any, about suitability of the same.