Exploring OTM in Mutual Funds: A Comprehensive Guide

Mutual funds are emerging as a preferred investment option amongst investors owing to the convenience of investing. One can invest in lump sum mode or through a Systematic Investment Plan (SIP). Under an SIP, the investment amount will be deducted from the investor's bank account periodically and invested in the specified mutual fund scheme.

Investors can register the SIP by adding a new biller through their bank's net banking portal. However, some investors may not have net banking privileges or may not wish to use them but still want to invest regularly in mutual funds. This is where 'One Time Mandate' (OTM) comes to the rescue of such investors.

OTM is a one-time registration process undertaken by the investor, whereby they authorise their bank account to deduct amounts up to a specified limit based on the requests received from the mutual fund house.

When the investor makes an investment transaction in lumpsum or SIP mode, the mutual fund house forwards a debit request to the bank to deduct the amount from the investor's bank account. The bank responds to such a request and deducts the specified amount, subject to the max limit set by the investor. Such an amount is then allocated towards the mutual fund investments as per the transaction request submitted by the investor. OTM debits happen through NACH (National Automated Clearing House).

Registering an OTM

The investor can register an OTM by submitting the OTM form with the mutual fund house or executing such a mandate online. When it comes to submitting the OTM form physically at any Official Point of Acceptance, the application form requires the following details:

Bank account
The OTM must be registered using a single bank account, wherein the investor must provide the bank account number, bank name and branch, bank account type, and the IFSC (Indian Financial System Code).

Personal details
The investors must provide their name, PAN (Permanent Account Number), registered KYC address, email and mobile number. In the case of joint holding of a bank account, one must also provide the details of other account holders.

Mandate limit
The investor must also provide the upper limit to honour the mandate. If any transaction exceeds the mandated limit, it will be rejected.

Period of mandate
Like SIP investments, one must mention the validity period for the OTM. An option is also provided to tick the default period of validity, which is up to December 2099. Further, one can also keep the mandate valid 'until cancelled'.

Signature
Once all the requisite details have been submitted in the OTM form, the investor must sign the form in their capacity as the bank account holder. The signatures on the OTM form must match the signatures available in the bank records. Additionally, other account holders must sign the OTM form if the OTM is registered in a bank account with joint operations.

Suppose the OTM registration is done online to validate the bank account. In that case, the portal requests a payment of Re. 1 from the bank account, which is refunded after successfully validating the bank account. The payment transaction ensures that the applicant is duly authorised to make transactions on the bank account through net banking credentials.

Advantages of OTM

1. Facilitates mutual fund investments – OTM enables mutual fund investing for the investors, as OTM is a one-time registration process to make investments over a given time.
2. Available even for non tech-savvy investors – Some mutual fund investors may not be tech-savvy. If they don't have net banking access or don't prefer using net banking to make online payments, they can use the OTM form to register the mandate in their bank account and make regular mutual fund investments after that.
3. Reduced registration time – A regular SIP registration process through ECS mode takes 21-30 days. In contrast, OTM registration is quick and hassle-free. SIP can be registered in less than five days for investors with the mandate registered in a bank account.
4. Multiple SIPs - One can register more than one SIP under the same OTM. However, one must ensure that the aggregate value of all the registered SIPs does not exceed the specified mandate limit.
5. Faster processing – Since the transactions are processed between the mutual fund house and bank account on a real-time basis, the funds are realised by mutual funds swiftly. This helps get the units allotted on the same day, since mutual funds can allocate units to investors only when funds are credited to their bank account.

As discussed above, OTM enables investors to make regular investments in mutual funds by undertaking a one-time mandate registration process. This makes the overall investment process hassle-free and conveniently helps investors board the investment journey.

Disclaimer-

This article is for general understanding on OTM. The actual registration process may vary with different fund houses.

Mutual Fund investments are subject to market risks, read all scheme related documents carefully.

To know about the KYC documentary requirements and procedure for change of address, phone number, bank details, etc. please visit https://www.utimf.com/servicerequest/kyc. Please deal with only registered Mutual funds, details of which can be verified on the SEBI website under "Intermediaries/market Infrastructure Institutions. All complaints regarding UTI Mutual Fund can be directed towards service@uti.co.in and/or visit www.scores.gov.in (SEBI SCORES portal). This material is part of Investor Education and awareness initiative of UTI Mutual Fund.