How to automate SIP online? OTM or Biller Mode Which is Better!
SIP or Systematic Investment Plan is a convenient way to invest in Mutual Funds. Nowadays, investments under mutual funds are grown drastically with the most possible reason for the lower interest of bank deposits. With the help of SIP, you can invest your capital into a mutual fund or indirectly into a stock market in a very systematic manner. All you need to plan your goal and decide the monthly contribution for a period.
SIP automates the transactions between your account and the mutual fund. More specifically, SIP debits the periodic installments and credits into your mutual fund automatically at intervals. It may be weeks, months, years, etc. The process of SIP registration over internet banking is called i-SIP.
i-SIP is an online paperless process. Anyone having an internet baking facility can opt for this for SIP registration. Here are the methods of registering i-SIPs:
Also, read: Gilt Funds - Features, Risk and Returns | Top Performing Gilt Funds
You can automate or opt for an auto-debit facility using two methods:
- OTM (One Time Mandate)
- Biller Method
OTM (One Time Mandate)
So, what is the OTM thing? Well, One Time Mandate or OTM is a popular auto-debit instrument. OTM is not only for SIPs but also for any kind of payment like utility bills, fees, etc. With this one-time process, you authorize your bank to debit a certain amount of funds. OTM can be registered online as well as offline. Almost all banks offer online OTM services. For offline OTM registration, you need to physically submit a signed OTM/ NACH (National Automated Clearing House) Mandate form to the concerned authority.
How to start E-Mandate using OTM?
Online OTM is paperless and a fast process. Not all Mutual Fund vendors do allow e-mandate using OTM. However, if your vendor allows, you can opt for it.
- First, plan your monthly SIP. You can use any SIP Calculator which will let you measure the estimated return from your SIPs.
- Then visit your chosen mutual fund application or website. Choose a fund and create a SIP.
- At the time of the creation of SIP, you will have to choose the OTM E-Mandate option for registering auto payments. And you will be redirected to your internet banking payment gateway to make a transaction of a small amount (mostly Rs. 1). This transaction will verify your savings account as well as create the OTM for you.
- Some fund houses may ask for an NACH mandate. For this, you need to submit a signed NACH form. Sometimes, you may need to submit a canceled cheque along with the NACH form.
How to Save Money - 10 Simple Money Saving Tips
Charges of OTM
Mandate Charge
The OTM is a service of banks. Banks may charge a certain amount to use their service. There is no fixed charge for it, which varies from bank to bank. Instruction of SIP payment using OTM is mostly free of cost. However, some banks charge even more than Rs. 200.
Penalty Charge
With the One-Time Mandate, you are permitting your bank to make a payment to 3rd party on a predefined date. If any reason the bank failed to make the payment due to insufficient account balance, they will debit a penalty charge for it. These charges typically in between Rs. 150 to Rs. 300.
How to cancel OTM?
In case of cancellation, online cancellation might not be available. You might have to visit your bank for the same. However, if the OTM registered for SIPs you need not approach the bank. Just visit your mutual fund website and place a stop or pause request for your SIP.
Biller Mode
With the Biller method, you can also automate your SIPs. All mutual fund vendors allow this method. The Biller method is a simple and more popular instrument for SIP registration than the One-Time Mandate. All you need to have an internet banking facility. Here are the steps to use this method:
- Step 1: Create a SIP from a mutual fund house.
- Step 2: You will receive an SMS or Email mentioning a URN (Unique Registration Number).
- Step 3: Visit your internet banking portal.
- Step 4: Create a new biller with the following mandatory information:
- Biller Name
- URN
- Auto debit amount
That’s all. The process is completed. In case of any modification or cancellation, you can manage it from the internet banking portal.
How to cancel i-SIP made with Biller Mode?
Anytime you are allowed to delete the biller and stop further payments whenever you want. Just visit your internet banking portal and delete the biller from the biller section. And you have done.
Also, read: How to automate i-SIP payment with SBI internet-banking?