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indhumathi Sayani made post

I understand that e-mandates can be given in case of systematic investment plans of mutual funds. How do these e-mandates for SIPs work and what are the benefits and risks in this method?

Answer
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shrinidhi Rajan answered.
12 months ago


You will be surprised to know that Indian mutual fund industry draws in systematic investment plans (SIPs) worth Rs.8500 crores per month? That is an awful lot of money considering that this is a steady flow and this also reflects the retail appetite for equity and tax saving funds. But the big challenge is still in the complexity of the process. Typically, the SIP has to be registered with the mutual fund and that is possible when you give the duly filled up SIP form with all details. Then there is your bank mandate which has to be sent to the bank along with your cancelled cheque and only after bank confirms can the ECS be registered. Once the ECS is registered, the mutual fund officially opens the SIP account and from that point your bank account is debited each month on a fixed date to fund the SIP. The entire process is quite elaborate and takes anywhere between 20-25 days for the SIP to be officially registered. Now we have an easier way to register a mutual fund SIP through the E-mandate route. What is e mandate in mutual fund and what are the advantages of e-Mandates? Here is how e-mandate for SIP works and here is why it is more useful to investors in mutual funds.

Like an online DP account, E-mandate is entirely Aadhar and PAN based. Currently, mutual fund marketers register mandates with the registrar through signed physical forms. They have to be signed and submitted in physical form for further processing. The E-Mandate facility offered now digitizes the entire process. It offers a very easy, elegant and hassle-free solution for mutual fund investors and also for mutual fund distributors. Under the E-Mandate scheme for SIPs, the total time for SIP registration is effectively crunched from 25 days to just 3 days. That is why E-Mandates are becoming increasingly attractive. But first, what exactly is this E-Mandate process?

The modus operandi of registering an E-Mandate is quite interesting. In fact, there are some basic pre-requisites that you need to understand here…

· E-Mandate facility is only available for mutual fund holders who hold these funds in single mode, or solo mode as it is called. Joint holders of mutual funds cannot avail E-Mandate as of now.

· E-Mandate has to be electronically signed and authenticated by your biometric Aadhar number. Now they also insist on a 16-digit virtual Aadhar id for you to transact and authenticate on the web. First and foremost, ensure that the mobile number registration for the E-Mandate is the same as the one registered for Aadhar. Also, the bank mandate provided by you for the E-Mandate must also be Aadhar verified. Otherwise the E-Mandate will not be possible. Mobile number is the key because you need to authenticate your Aadhar with an OTP.

· Ensure that your PAN number is updated in all respects and same PAN is mapped to your Aadhar card and to your MF investment. Unless the mapping is proper and foolproof at all the three levels, your authentication is unlikely to go through and the E-Mandate may insist on additional levels of authentication.

· E-Mandate facility is available only for the banks that are enabled for such payments under the National Payment Council of India (NPCI). Most of the large banks in India are already NPCI registered.

· If you opt for the E-Mandate facility, your maximum investment is capped at Rs.1 lakh. So this is not for all investors but only for the very small investors. Currently, you are not permitted to invest above this cap.

· How the E-Mandate facility actually adds value to you? That is an interesting question. The process is entirely digital end-to-end with no involvement of any physical forms or signatures at any point of time. Just ensure that your bank account, your PAN and your Aadhar card have common mapping with respect to address, mobile number etc.

· E-Mandate can be registered within 2-3 days and you can commence your SIP in less than 7 days unlike a wait of over 30 days in the alternate scenario. To that extent, the process becomes shorter and smarter.

· This system also suits the distributors as they can now expand a much larger client base and also use simple Aadhar authentication to onboard SIP investors. In fact, the distributors and financial advisors could be the real big beneficiaries.

· E-mandate is a process that is less prone to errors and physical delays. When you send a physical mandate, there is the risk that your mandate could get rejected by the bank due to signature mismatch or by the registrar for technical reasons. E-Mandate resolves most of these problems.

In a nutshell, one must admit that the E-Mandate facility is a great step forward for investors and for mutual fund distributors despite the upper ceiling in terms of total investments. Above all, it simplifies the process and crunches the processing time. This could be a big boost for spreading the SIP culture among smaller and mid-sized towns in a big way. Of course there are some restrictions to begin with but that is more to protect the interests of the customer per se.


user profile image
shrinidhi Rajan answered.
12 months ago


You will be surprised to know that Indian mutual fund industry draws in systematic investment plans (SIPs) worth Rs.8500 crores per month? That is an awful lot of money considering that this is a steady flow and this also reflects the retail appetite for equity and tax saving funds. But the big challenge is still in the complexity of the process. Typically, the SIP has to be registered with the mutual fund and that is possible when you give the duly filled up SIP form with all details. Then there is your bank mandate which has to be sent to the bank along with your cancelled cheque and only after bank confirms can the ECS be registered. Once the ECS is registered, the mutual fund officially opens the SIP account and from that point your bank account is debited each month on a fixed date to fund the SIP. The entire process is quite elaborate and takes anywhere between 20-25 days for the SIP to be officially registered. Now we have an easier way to register a mutual fund SIP through the E-mandate route. What is e mandate in mutual fund and what are the advantages of e-Mandates? Here is how e-mandate for SIP works and here is why it is more useful to investors in mutual funds.

Like an online DP account, E-mandate is entirely Aadhar and PAN based. Currently, mutual fund marketers register mandates with the registrar through signed physical forms. They have to be signed and submitted in physical form for further processing. The E-Mandate facility offered now digitizes the entire process. It offers a very easy, elegant and hassle-free solution for mutual fund investors and also for mutual fund distributors. Under the E-Mandate scheme for SIPs, the total time for SIP registration is effectively crunched from 25 days to just 3 days. That is why E-Mandates are becoming increasingly attractive. But first, what exactly is this E-Mandate process?

The modus operandi of registering an E-Mandate is quite interesting. In fact, there are some basic pre-requisites that you need to understand here…

· E-Mandate facility is only available for mutual fund holders who hold these funds in single mode, or solo mode as it is called. Joint holders of mutual funds cannot avail E-Mandate as of now.

· E-Mandate has to be electronically signed and authenticated by your biometric Aadhar number. Now they also insist on a 16-digit virtual Aadhar id for you to transact and authenticate on the web. First and foremost, ensure that the mobile number registration for the E-Mandate is the same as the one registered for Aadhar. Also, the bank mandate provided by you for the E-Mandate must also be Aadhar verified. Otherwise the E-Mandate will not be possible. Mobile number is the key because you need to authenticate your Aadhar with an OTP.

· Ensure that your PAN number is updated in all respects and same PAN is mapped to your Aadhar card and to your MF investment. Unless the mapping is proper and foolproof at all the three levels, your authentication is unlikely to go through and the E-Mandate may insist on additional levels of authentication.

· E-Mandate facility is available only for the banks that are enabled for such payments under the National Payment Council of India (NPCI). Most of the large banks in India are already NPCI registered.

· If you opt for the E-Mandate facility, your maximum investment is capped at Rs.1 lakh. So this is not for all investors but only for the very small investors. Currently, you are not permitted to invest above this cap.

· How the E-Mandate facility actually adds value to you? That is an interesting question. The process is entirely digital end-to-end with no involvement of any physical forms or signatures at any point of time. Just ensure that your bank account, your PAN and your Aadhar card have common mapping with respect to address, mobile number etc.

· E-Mandate can be registered within 2-3 days and you can commence your SIP in less than 7 days unlike a wait of over 30 days in the alternate scenario. To that extent, the process becomes shorter and smarter.

· This system also suits the distributors as they can now expand a much larger client base and also use simple Aadhar authentication to onboard SIP investors. In fact, the distributors and financial advisors could be the real big beneficiaries.

· E-mandate is a process that is less prone to errors and physical delays. When you send a physical mandate, there is the risk that your mandate could get rejected by the bank due to signature mismatch or by the registrar for technical reasons. E-Mandate resolves most of these problems.

In a nutshell, one must admit that the E-Mandate facility is a great step forward for investors and for mutual fund distributors despite the upper ceiling in terms of total investments. Above all, it simplifies the process and crunches the processing time. This could be a big boost for spreading the SIP culture among smaller and mid-sized towns in a big way. Of course there are some restrictions to begin with but that is more to protect the interests of the customer per se.