What Is The Meaning Of E-Mandate For Mutual Funds?
E-mandate is a facility to help invest in Mutual Funds. It helps reduce SIP registration time from 25 days to 2-3 days.
Systematic investment plans (SIPs) have long been a preferred method of investing in mutual funds for small and retail investors. India already has nearly 2.3 crore SIP accounts and it is growing by the day. However, the procedure to start SIP is quite complicated. First, you need to register a SIP which has to be recorded with fund and the registrar. Secondly, the SIP mandate has to be approved by the bank and the bank has to be informed to debit the relevant bank account on the specific date. Once the registration is done, then it becomes an automatic process. If you want to register the second SIP, then you need to go through the entire process again. The entire process of SIP registration takes around 25-30 days before your SIP can actually commence. Finally, there is a way to compress these timelines to as low as 2-3 days to register you SIP. Welcome to the world of e-mandate for mutual funds.
E-Mandate is a PAN and Aadhar Based Process
Under the current system, mutual fund marketers register mandates with the registrar in the form of signed physical forms. These are currently required to be signed and submitted in physical form for further processing. The E-Mandate facility actually digitizes the entire process. It therefore offers a very simple and hassle-free solution for mutual fund investors and also for mutual fund distributors. The entire time cycle for registering mandates for SIPs is reduced from 3-4 weeks to just about 2-3 days in case of E-Mandates of mutual funds.
What Is the Procedure for E-mandate for Mutual Funds?
The procedure for registering an E-Mandate entails some basic steps
- This facility is only available for mutual fund holders who hold these funds in single mode. Joint mode holders of mutual funds cannot avail this facility of E-Mandate as of now.
- The E-Mandate has to be electronically signed and authenticated by Aadhar. You need to 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.
- Before applying for the E-Mandate also ensure that your PAN number that you are giving for the MF investment is also mapped to your bank mandate. Your PAN also needs to be mapped to your Aadhar; otherwise the application could be rejected.
- The E-Mandate facility is only available for the banks that are enabled under the National Payment Council of India (NPCI). Most of the large banks in India are already NPCI registered and hence it should not be much of an issue.
- There is a maximum cap of Rs. 1 lakh for investments via the E-Mandate facility. Currently, you are not permitted to invest above this cap.
Major Advantages of the E-mandate Facility
The E-Mandate facility offers some key advantages due to its efficiency and speed.
- The entire process is totally digital and there is no involvement of any physical forms or signatures required at any point of time. You just need to take care of the Aadhar details and mapping before applying for the E-Mandate.
- The E-Mandate will be registered within 2-3 days and you can commence your SIP in less than 7 days. This is a far cry from the present system where the SIP registration takes close to a month.
- Even mutual fund sellers and distributors will find this much easier as they need to invest less time and energy in going through the routine physical processes.
- Above all, this is a fool proof process. 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. Being online, most of these problems are totally eliminated here.
The E-Mandate facility is a great improvement for investors and for mutual fund distributors. The most important thing is that it simplifies the process and crunches the processing time. For a fast growing SIP market like India, the E-Mandate should be a big thrust, at least for the small investors.