What is OTM in Mutual Fund?

Investing in a mutual fund is one of the finest options if you are a beginner. It allows you to not just gain good returns but also manage your risks in a better manner as compared to stocks. Also, it offers you the option to invest in a lumpsum or SIP format.

While investing lump sum is quite direct, you need to understand how the SIP works. In SIPs, you invest a particular amount of money every month on a fixed date. And this amount is debited directly from your bank account with no need for your intervention. 

This is where you need to understand the role of OTM in mutual funds. In general terms, it stands for the one-time mandate which allows you to give standing instructions to deduct the SIP amount automatically. But is that it? Well, there is more to it.

So, read this guide to know what is OTM in mutual funds. Understand how it works and its benefits here in this guide. 

Understanding OTM Meaning in Mutual Fund

The OTM meaning in a mutual fund is quite straightforward. OTM stands for the One Time Mandate. It is an authorization that you provide to your bank, which permits the automatic debit for mutual fund or SIP investments.

As shared, this is mainly used by the SIPs. It allows you to debit a fixed amount on a fixed date every month. The process requires no human intervention or approval every time, which saves time and ensures the process works smoothly. 

This ensures that your investments remain disciplined, timely, and hassle-free.

Key Features of OTM

• One-time setup: You only need to register the mandate once with your bank or AMC. This stays valid for the SIP debits for the time you have confirmed. 

• Flexibility in limits: Investors can set a maximum debit limit. It can be anything like Rs. 500 or Rs. 1,00,000. This allows the investors to have full control over how much can be deducted.

• No repeated approvals: Unlike UPI apps or net banking, there is no need to authenticate everytime. The transactions get completed on their own until there is an issue with your account, like a lack of funds or a debit freeze. 

• Secure process: The OTM mandate is verified and approved by the bank. This ensures that there is complete security. Also, the compliance is done by the bank, which means the chances of fraud are next to nil.

• Convenient online registration: Most platforms allow OTM registration online. There is no need for multiple documents to be signed. The entire process is paperless and faster.

With these features, OTM becomes a crucial enabler for investors. It allows them not just to manage the mutual fund investments but also to ensure that the SIP payments are completed on time to gain the best returns. 

OTM Registration in Mutual Fund

OTM registration in a mutual fund is the process of linking your bank account with the AMC or mutual fund platform. This is a one-time activity where you authorize your bank to deduct a pre-defined amount backed by a maximum limit. It allows you to ensure that your SIP or purchase order goes through smoothly. 

Once approved, the mandate remains valid for years, unless you decide to cancel or modify it. Now, to set this mandate, there is an option to go online or offline. To understand better, here are the generic steps that you would need to follow.

OTM Registration Online

1. Log in to your mutual fund platform or AMC website.

2. Go to the OTM registration section.

3. Select “Register Online.”

4. Enter your bank details. It generally asks for account number and IFSC.

5. Set the maximum debit limit (example: Rs. 50,000 or Rs. 1,00,000).

6. Authorize the mandate using Aadhaar OTP, net banking, or debit card verification.

7. Submit the request. 

8. The bank will now verify the details in a few days.

9. Once done, they will approve the same.

10. Your SIP will start. The amount will now be debited on the date decided every month. Ensure that you have enough funds in your account.

OTM Registration Offline

1. Collect the OTM mandate form. This can be from your AMC, distributor, or download it from their website.

2. Fill in personal details such as name, PAN, and others.

3. Share the bank account information.

4. Set the debit limit.

5. Mention the frequency of SIP transactions.

6. Sign the form with your registered signature (matching bank records).

7. Submit the form to the AMC, distributor, or your bank.

8. The form is sent to your bank for verification.

9. Once done, this will be approved by the bank. 

10. Here, you will now receive the confirmation of the mandate activation. Your SIP will now start, and the amount will be debited on its own every month.

Pros and Cons of OTM in Mutual Funds

Now that you know the reason why you need the OTM in a mutual fund, you must also know the pros and cons of having the same. So, here are the pros and cons that you must know of:

Conclusion

OTM in mutual funds is not just about simplifying payments. It is about helping you to stay disciplined and gain a habit of investment that can help you with wealth generation. When you automate the SIP debits, you ensure that the payments are processed on time. It eliminates the chances of missed installments and ensures there is consistency.

And the best part is you can select from either online or offline options to register for the OTM. Gain complete control and ensure flexibility with these choices. And if you are looking to start your investment journey, select the right partner. 

This is where Rupeezy can help you out. It is a perfect platform that offers you complete support and guidance. So, start today!

FAQs

Q1. Is OTM safe for mutual fund investors?

Yes, OTM is completely safe. It is processed through your registered bank account and backed by the proper verification. There is a debit limit set, which ensures all your transactions are managed properly. 

Q2. Can I increase or decrease my OTM limit later?

Yes, you can modify your OTM limit. Just submit the request to your AMC, and the same will be updated. Once approved, you will get the new limit set. 

Q3. How do I know if my OTM registration is successful?

You will receive the confirmation. Once the OTM is approved, you will get a message and an email. There is an option to check the status online as well. 

Q4. Does OTM work across multiple mutual fund houses?

Yes. If the OTM is registered through a platform or distributor, multiple AMCs can use it. But if it is registered with a fund house, then it might not work.

Q5. What should I do if an OTM debit fails?

If your OTM fails, first know the reason. You can ask the AMC or even the bank. If it is due to a funding issue, there will be a penalty for it. Other reasons can be resolved with the help of AMC or the bank. Sometimes, your SIP might get cancelled as well.