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One-Time Mandate (OTM) for Automated Investment in Mutual Funds

A young boy dropping a newspaper at our doorstep or waking up to a doorbell at 5 in the morning only to find a pouch of milk at the door is the daily routine of most Indian households. So, why do we subscribe to these when the shops are easily accessible? To save the hassle, correct?

Imagine investing in a scheme of your choice on a fixed day of every month to build a corpus to achieve small or big financial dreams. That’s equally cumbersome. But why do it manually when one can also automate this service (like paperwala or doodhwala)? OTM, or One-Time Mandate, is a facility that enables mutual fund investors to automatically invest a fixed amount on a selected date in the mutual fund of their choice. Let’s understand what OTM is in detail.

What is OTM in a Mutual Fund?

OTM is a one-time registration process for Systematic Investment Plan (SIP) investors. When investors start SIP in a mutual fund, they select a scheme of their choice and make the first payment. But for subsequent instalments, they have to register OTM. To do this, the investor has to fill in required details mentioned in the OTM form and submit it duly signed for registration. This way, the investor instructs the bank to periodically transfer the fixed amount (SIP amount) to the SIP portfolio.

OTM is a critical registration process, as, without this, neither the bank nor the mutual fund house will proceed with the investor’s SIP. This single process can automate investment and smooth the financial journey like a magic wand.

Advantages of OTM in Mutual Fund

  1. OTM saves the hassle of transacting manually in a selective scheme until the achievement of the goal.
  2. There are higher chances of unit allotment on the same day if SIP is started via OTM, as the funds are released on the same day of the transaction.
  3. The automated SIP deduction instils financial discipline within an investor and saves the efforts of timing the market.
  4. OTM registration ensures secure payment as there’s no risk of failure due to net banking errors or other online transaction-related failures.

FAQ

1.What is the benefit of OTM over ECS (Electronic Clearance Service)?

ECS, or Electronic Clearing Service mandate, requires the customer to submit a cheque or demand draft to set up future payments, and it generally takes 30 days to activate this process. OTM is much easier, more convenient and faster than ECS.

2.Is OTM available for all?

Yes, both individuals and corporates can register OTM.

3.Can the OTM be modified?

Yes, the OTM application, once submitted, can be modified by filling in another form (modify OTM).

4.Can the OTM get rejected?

Yes. The OTM can get rejected if the investor’s bank is not a part of National Automated Clearing House(NACH) or if the investor has provided incorrect bank details.

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Disclaimer:
Helpful information for investors: All Mutual Fund investors have to go through a one-time KYC (know your Customer) process. Investors should deal only with registered mutual funds, to be verified on SEBI website under 'Intermediaries/ Market Infrastructure Institutions'. For redressal of your complaints, you may please visit www.scores.gov.in . For more info on KYC, change in various details & redressal of complaints, visit mf.nipponindiaim.com/investoreducation/what-to-know-when-investing This is an investor education and awareness initiative by Nippon India Mutual Fund.

The information herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional guide for the readers. The document has been prepared on the basis of publicly available information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their associates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of lost profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this document. Language Disclaimer:
While utmost care has been taken in translating the article into respective regional language(s), in case of any confusion or difference of opinion, article available in English language should be deemed as final. The article provided herein is meant only for general reading purposes and the views being expressed only constitute opinions and therefore cannot be considered as guidelines, recommendations or as a professional advice for the readers. The document has been prepared on the basis of publicly available data/ information, internally developed data and other sources believed to be reliable. The sponsor, the Investment Manager, the Trustee or any of their directors, employees, associates or representatives (“entities & their associates”) do not assume any responsibility for, or warrant the accuracy, completeness, adequacy and reliability of such information. Recipients of this information are advised to rely on their own analysis, interpretations & investigations. Readers are also advised to seek independent professional advice in order to arrive at an informed investment decision. Entities & their associates including persons involved in the preparation or issuance of this material shall not be liable in any way for any direct, indirect, special, incidental, consequential, punitive or exemplary damages, including on account of loss of profits arising from the information contained in this material. Recipient alone shall be fully responsible for any decision taken on the basis of this article. "ABOVE ILLUSTRATIONS ARE ONLY FOR UNDERSTANDING, IT IS NOT DIRECTLY OR INDIRECTLY RELATED TO THE PERFORMANCE OF ANY SCHEME OF NIMF. THE VIEWS EXPRESSED HEREIN CONSTITUTE ONLY THE OPINIONS AND DO NOT CONSTITUTE ANY GUIDELINES OR RECOMMENDATION ON ANY COURSE OF ACTION TO BE FOLLOWED BY THE READER. THIS INFORMATION IS MEANT FOR GENERAL READING PURPOSES ONLY AND IS NOT MEANT TO SERVE AS A PROFESSIONAL GUIDE FOR THE READERS."

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