Mutual Funds: A Quick Take on E-Mandate for SIPs

An e-mandate is a digital payment service wherein a bank account holder allows another party, such as a service provider or a merchant, to automatically debit funds from their account to automate recurring payments without any human intrusion.

An e-mandate in mutual funds relates to an electronic authorisation provided by an investor to enable recurring investments in mutual fund schemes. It allows investors to automate their periodic investments, such as systematic investment plans (SIPs), by giving a go-ahead to the asset management company (AMC) or fund house to debit the specified amount from their bank account at regular intervals, which could be weekly, monthly, or quarterly.

There are various e-mandates for SIPs, and the most common among them include: Aadhaar-based e-mandate, application-program interface (API)-based e-mandate and physical e-mandate. 

In order to opt for an e-mandate for SIP, the following steps are involved:

• An investor is required to go in for a mutual fund scheme that accepts SIP investments and enroll in SIP with the AMC or fund house.
• The e-mandate form is to be downloaded from the mutual fund’s website, or one can ask the fund house for the same.
• Fill out the e-mandate form with relevant bank account information, investment information, and other such pertinent details.
• To verify the bank account, attach a cancelled cheque or a copy of a bank statement along with the e-mandate form.
• Finally, complete the e-mandate form and return it to the AMC or fund house.
• The fund house will commence an e-mandate auto debit facility for the amount provided as per the date specified after the mandate is processed.

Generally, SIP investments are automatically deducted from the bank account on the designated date every month, and the money is invested in the mutual fund plan that an investor has chosen.

It is important to note that one must have adequate cash in the bank account on the SIP investing date for the e-mandate debit to be successful. In addition, it is crucial to frequently check the SIP investments and make modifications as needed to ensure that they align with the financial goals.