In India, the way people invest in mutual funds has completely changed as a result of Systematic Investment Plans (SIPs). By promoting consistent investments as opposed to big, sporadic commitments, they provide a methodical and structured approach to wealth creation. The idea of the mandate amount is one of the most important developments in SIPs, especially as digital investing becomes more popular.
By automating payments and eliminating the need for continuous manual approval, a mandate amount simplifies the investment process.
The mandated amount in a SIP is the set sum of money that an investor authorises to be automatically deducted from their bank account in favour of mutual fund investments; it may be equal to or greater than the SIP installment amount. By completing a digital authorisation or one-time mandate (OTM) form, the investor sets up a SIP, which enables the bank to process recurring debits without needing to be contacted repeatedly.
For example, if the mandate amount is set at ₹20,000 and the SIP instalment is only ₹5,000, the bank will debit only ₹5,000 each month. The larger mandate simply acts as a cap, ensuring flexibility for future increases or additional investments.
Thus, while the SIP instalment represents the actual recurring contribution, the mandate amount provides an upper limit, offering operational flexibility and long-term convenience.
The requirement for a mandate arises from both convenience and regulatory compliance. Its primary advantages include:
In short, the mandate ensures that SIPs function smoothly, encouraging disciplined wealth accumulation while meeting regulatory standards.
Choosing a SIP mandate amount is not a random decision. Instead, it reflects both present requirements and future ambitions.
Investors typically set the mandate amount by considering:
| SIP Instalment (₹) | Mandate Amount (₹) | Sufficient for Step-up? |
| 5,000 | 5,000 | No |
| 5,000 | 15,000 | Yes |
This shows that while a mandate of ₹5,000 matches the current SIP instalment, it leaves no scope for future increases. By contrast, a ₹15,000 mandate accommodates flexibility and growth.
Though related, the two concepts serve different purposes. The SIP instalment amount is the actual recurring investment, while 'mandate amount' is the maximum authorisable debit limit.
| Particulars | SIP Instalment Amount | Mandate Amount |
| Definition | Actual recurring investment | Maximum authorisable debit limit |
| Editable after setup | Sometimes, with AMC approval | Requires new OTM submission |
| Usage | Each scheduled contribution | Capping of auto-debits |
| Example value | ₹5,000 | ₹15,000 |
In essence, the SIP instalment amount is the fixed recurring contribution, whereas the mandate amount is an upper cap, ensuring that future adjustments do not require a new mandate.
Investors are free to change their mandate amount as necessary. Usually, to accomplish this, a new OTM or eNACH (electronic National Automated Clearing House) mandate with the targeted limit is submitted.
Key considerations include:
Thus, while modification is possible, it requires planning to avoid interruptions in the investment cycle.
Selecting the correct mandate amount demands thoughtful evaluation of one’s financial circumstances and investment aspirations.
Steps to consider include:
Assume, for example, that an investor currently contributes ₹10,000 per month to SIPs, with a 10% annual increase expected over the next five years. Setting a mandate of ₹20,000 would be beneficial in order to account for both unanticipated contributions and incremental increases.
Opting for a higher mandate amount offers several advantages:
This flow ensures a transparent, automated process, minimising delays and errors.
A one-time SIP typically refers to a single lump sum investment in a mutual fund. Although SIPs are primarily designed for recurring payments, the term is often used interchangeably with ‘bulk’ or ‘single’ contributions. The one-time mandate (OTM) means that an investor provides standing authorisation to their bank to debit up to a fixed limit whenever required. This simplifies both recurring SIP contributions and occasional lump sum payments, eliminating repetitive documentation. In essence, OTM in SIP is the digital or physical instruction that enables automatic debits, forming the backbone of modern SIP operations and ensuring seamless, error-free investing.
There is generally a limit to the SIP mandate amount, often up to ₹1 crore per day for individuals, though investors may set a lower amount for added control. Mandates can occasionally fail due to insufficient balance, expiry, cancellation, or technical errors during the debit process, and banks may levy penalties for such failures. While digital platforms now favour e-mandates, the principle remains the same, with one authorisation allowing effortless and consistent investing for the future.
Both new and experienced investors now need to understand what OTM in SIP is and what the mandated amount in SIP is in the ever-changing investment landscape of today. By giving their banks a one-time mandate, people enable their banks to automate debits, improving consistency, convenience, and discipline.
Selecting the appropriate mandate amount, ideally greater than the immediate needs, provides flexibility for lump sum investments, multiple SIPs, and future growth. By doing this, investors benefit from operational efficiency and peace of mind, all while staying within the legal parameters created to safeguard their interests.
In the end, the mandate is more than just a formality. It serves as the fundamental basis for SIPs' seamless operation, guaranteeing the investor's continuous and sustainable path to wealth accumulation.
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