One-Time Mandate
Also written OTM · One-Time Mandate (OTM) · OTM mandate
A folio-level authorisation letting a specified mutual fund debit a specified bank account through NACH for purchases, up to a set limit, so the investor need not initiate payment each time.
In plain language
Every mutual fund purchase needs a payment. Writing a cheque, or logging into net banking, each time is friction — and friction makes investors skip instalments.
A One-Time Mandate (OTM) removes it. It is a payment facility through which an investor authorises their bank to process debits to a specified bank account, raised by a specified mutual fund, for the purchase of units. The debits go through the National Automated Clearing House (NACH).
The investor registers the account once. After that, the fund can debit it for eligible purchases in that folio without the investor having to initiate each payment — whether the purchase is placed physically, online, by SMS or through other modes the fund offers.
The mandate is not a blank cheque. The investor sets the frequency, a fixed amount or daily maximum, and the validity period, and can cancel it.
How it works
Registering an OTM.
| Item | Rule |
|---|---|
| Who submits | Existing investor: OTM form to an Investor Service Centre. New investor: OTM form with the application form |
| Bank details | Bank name, account number, account type, IFSC and MICR code |
| Proof | Cancelled cheque or copy with name and account number pre-printed |
| Identifiers | Folio number (existing) or application form number (new), plus email and phone |
| Frequency | Monthly, quarterly, half-yearly, or "As and when presented" |
| Amount | A fixed amount, and a maximum that can be debited daily |
| Validity | The period for which the mandate is valid |
| Signatures | Name(s) and signatures of the bank account holders |
| Time to register | 3 to 4 weeks |
Using it.
- The mandate is at folio level: it can be used for all purchase transactions under that folio.
- Choosing "As and when presented" enables multiple SIP or other purchase debits under the folio. There is no limit on the number of transactions as long as the total stays within the daily maximum.
- Mutual funds may specify which schemes and which purchase types — fresh lump sum, additional purchase, SIP — can use the OTM.
- It works for purchases through physical, online, SMS and other modes.
- It can be cancelled by submitting the OTM form marked for cancellation.
NACH itself — launched by NPCI and the successor to ECS for repetitive payments such as SIP debits — is what carries the debit.
A worked example
Priyanka, a new investor, fills in her first application for a large-cap fund and submits an OTM form with it. She chooses "As and when presented" with a daily maximum of Rs 25,000, valid for 10 years, and attaches a cancelled cheque with her name pre-printed. Registration takes about 3 to 4 weeks. Amounts are illustrative.
Once registered, on a single day she places:
| Transaction in the same folio | Amount |
|---|---|
| SIP instalment, large-cap scheme | Rs 10,000 |
| SIP instalment, flexi-cap scheme | Rs 5,000 |
| Additional lump sum by SMS | Rs 8,000 |
| Total debited that day | Rs 23,000 |
All three go through, because the number of transactions is unlimited and the total of Rs 23,000 is within her Rs 25,000 daily maximum.
If she also tried an online purchase of Rs 5,000 the same day, the total would be Rs 28,000 — above the daily maximum — so that debit would not fit within the mandate.
Next year she switches banks. She cancels the OTM by submitting the form marked for cancellation, and registers a new one against the new account — allowing another 3 to 4 weeks, during which she pays for any purchase by other modes.
Why NISM asks about it
Chapter 9 (Investor Services), under payment modes for mutual fund purchases, describes the One-Time Mandate — NACH, folio-level scope, "As and when presented", daily maximum, registration details and the 3 to 4 week timeline. Expect questions on what an OTM does, whether it is folio-level or scheme-level, what "As and when presented" enables, and how long registration takes.
Common exam traps
- Folio-level, not scheme-level — usable for all eligible purchases under the folio.
- For purchases, not redemptions.
- Debits run through NACH.
- "As and when presented" enables multiple SIP and purchase debits; no limit on the number of transactions within the daily maximum.
- Registration takes 3 to 4 weeks.
- A specified mutual fund, a specified bank account — the mandate is not usable by other fund houses.
- The mutual fund may restrict which schemes and purchase types can use it.
- Cancel by submitting the OTM form indicating cancellation.
Where this is taught
- Series V-A · Chapter 9: Investor Servicesintroduced here
- Series V-D · Chapter 9: Investor Servicesintroduced here
- Series V-B · Chapter 9: Investor Servicesintroduced here
Related terms
- Direct and regular plansThe two routes into the same mutual fund scheme: a direct plan with no distributor and a lower expense ratio, and a regular plan that pays distributor commission — same portfolio, separate NAVs.
- Registrar and Transfer AgentThe SEBI-registered agency that keeps the investor records of a mutual fund — processing purchases and redemptions, updating folios and unit capital, and issuing account statements.
- Systematic Investment PlanA facility to invest a constant amount into a scheme at regular intervals, which buys more units when the NAV is low and fewer when it is high and so averages the cost of acquisition down.
- Systematic Transfer PlanA standing instruction to move a fixed amount from one scheme into another of the same mutual fund at a set frequency — a withdrawal plan out of the source and a SIP into the target.
- UnitThe share of a mutual fund scheme that an investor's money is translated into — typically carrying a face value of Rs 10, and worth whatever the scheme's NAV is on the day.
- NACHNational Automated Clearing House — NPCI's centralised electronic clearing system for repetitive payments, which replaced ECS and now carries SIP debits and dividend and redemption credits.