A one-time bank mandate for mutual funds is an authorization given by an investor to their bank to allow the mutual fund company to directly debit funds from their bank account for the purpose of purchasing mutual fund units. This mandate is usually provided by investors when they are setting up a Systematic Investment Plan (SIP) or making a lump sum investment in a mutual fund.
Once the mandate is set up, the mutual fund company is authorized to withdraw the specified amount of money from the investor’s bank account at predefined intervals (for SIP) or as a one-time transaction (for lump sum investments). This streamlines the investment process for the investor, as they don’t need to manually initiate each transaction, and it ensures timely investments according to the investment plan chosen by the investor.
Process of One-Time Bank Mandate (OTM)
A one-time bank mandate (OTM) for mutual funds is a facility provided by mutual fund companies to investors to streamline the investment process. Here’s how it typically works:
- Authorization: When an investor decides to invest in a mutual fund, they provide a one-time authorization to the mutual fund company to debit a specific amount from their bank account.
- Purpose: The purpose of this mandate is usually to facilitate a lump sum investment in a mutual fund scheme. It allows investors to make a one-time payment without the need for manual transactions for subsequent purchases.
- Setup: To set up a one-time bank mandate, the investor typically fills out a form provided by the mutual fund company. This form contains details such as the investor’s bank account information, the amount to be invested, and any other relevant details.
- Processing: Once the mandate is set up and the mutual fund company receives the necessary authorization, they initiate the debit transaction from the investor’s bank account.
- Investment: The funds debited from the investor’s bank account are then used to purchase units of the chosen mutual fund scheme at the prevailing Net Asset Value (NAV).
- Confirmation: After the transaction is processed, the investor receives a confirmation of the investment, usually in the form of a statement or an email from the mutual fund company.
- Regulatory Compliance: Mutual fund companies adhere to regulatory guidelines and ensure that the one-time bank mandate process complies with relevant regulations and safeguards the investor’s interests.
One-time bank mandates offer convenience to investors by automating the investment process for lump sum investments, eliminating the need for manual transactions for each purchase. They also help in ensuring timely investments and can be particularly useful for investors who prefer a one-time investment approach rather than periodic investments through SIPs (Systematic Investment Plans).
Types of Bank Mandate (OTM)
There are several types of one-time bank mandates, each serving a different purpose or transaction type. Here are some common types:
- One-Time Payment Mandate: This type of mandate allows a one-time debit from a bank account for a specific payment. It could be for various purposes such as utility bill payments, loan repayments, or investment transactions like purchasing mutual fund units.
- Investment Mandate: A one-time bank mandate for investments authorizes a single transaction to invest a lump sum amount into a financial instrument or product. For example, it could be used for purchasing mutual funds, stocks, bonds, or other investment securities.
- E-commerce Transactions: In the context of e-commerce, a one-time bank mandate allows a single debit from the bank account for a specific purchase made online. It’s commonly used for one-time purchases where the customer doesn’t want to save their payment information for future transactions.
- Subscription Payments: Some services or subscriptions may offer a one-time bank mandate option for payment. This allows customers to make a single payment for a specific subscription period without setting up recurring payments.
- Charitable Donations: Non-profit organizations may use one-time bank mandates to collect one-off donations from supporters. Donors provide authorization for a single debit from their bank account for the specified donation amount.
- Loan Repayments: Borrowers may use a one-time bank mandate to authorize a single loan repayment from their bank account. This could be for the full loan amount or for a specific installment.
- Insurance Premium Payments: Insurance companies may offer a one-time bank mandate option for premium payments. Policyholders authorize a single debit from their bank account for the premium amount due.
These are just a few examples of the types of one-time bank mandates that exist. The specific types and their availability may vary depending on the financial institution, service provider, or organization offering the mandate facility.
