Are SIP funds deducted from the bank account?

Many choose the SIP (systematic investment plan) route because of its affordability and lower volatility impact on investments owing to its rupee cost averaging feature. Moreover, this mode has the potential to generate risk-adjusted returns regardless of the market condition only if you remain invested over a long-term period. However, when you open an SIP, you should provide your savings bank details to set up a standing instruction for automatic amount deduction. 

While you are allowed to start your SIP investment manually without the need for setting up an automatic deduction mandate, it is recommended to set up an auto deduction facility for your predetermined SIP deduction to enjoy the simplicity and convenience of recurring and automated payments. Discussed here is all about OTM (one-time mandate) in SIP mutual funds. 

What’s an OTM (one-time mandate)?

OTM is an auto payment registration process, which you require setting up one time. Once you set up this option, a fixed amount is deducted automatically on a predetermined time period. This process omits the need for you to worry about making your SIP investment manually. On setting up this mandate, a predefined SIP amount is automatically deducted from your savings bank account and invested in the preferred mutual fund scheme. 

What are the benefits of activating OTM on your SIP?

If you do not want to miss out on making timely SIP investments towards your preferred mutual fund scheme, you must activate OTM. Here are some of the crucial benefits of OTM –

·    Stress-free registration procedure

For activating OTM, all you must do is provide a filled out and signed OTM form. The financial institution generally will take around 2 weeks to complete the OTM registration process. 

·       Security 

This process is a secure, safe, and quick investment mode. You must ensure to provide your savings bank account and a mutual fund linked information just once to activate this mandate. 

·       Zero limits on the number of SIP payments

You can set multiple SIP payments through the same OTM. There is no fixed limit on the overall number of SIP payments allowed under a single OTM.  

·       Instils financial discipline

Automated SIP payment at periodic interval inculcates financial discipline. This procedure, in turn, assists in attaining financial success and massive wealth over a long time period.

Ending note

The SIP amount may be deducted automatically if you activate the OTM. OTM is a one-time mandate wherein you instruct your savings bank account to automatically deduct a specific amount from your saving account on a predetermined time period towards your SIP portfolio. Once you activate the OTM facility, you do not require following the payment procedure every time the due date for SIP investment is near.  

Thus, an OTM is an advantageous mode of investing in an SIP automatically. This mandate instils financial discipline, which allows you to timely invest in the preferred mutual fund through SIPs without the need for keeping a track of the date by when you must invest.