Bank Mandate Form – Overview, Process, and Benefits

Bank mandate forms can be a useful tool for investors who have taken the SIP route to invest in mutual funds. We have covered the following in this article:

You must be tired if you were issuing cheques each time you initiate a mutual fund SIP. Wondering how to automate the whole process? Try issuing a ‘Bank Mandate Form’. A bank mandate is the latest way to streamline your mutual fund SIPs. It makes the entire process a lot simpler and investing becomes convenient and straightforward.

Bank Mandate Forms and Mutual Funds: An Overview

In a bank mandate, a third party will be authorised to debit a specific sum from your bank account at regular intervals. By submitting a mandate form, you authorise your bank to conduct an auto-debit transaction. In this transaction, a certain amount is drawn from your savings account on predetermined dates.

The drawn amount is then invested by way of SIPs in your chosen mutual fund schemes. Hence, bank mandates facilitate investments in the most hassle-free, paperless, and convenient manner.

When Are Bank Mandate Forms Necessary

As you know, under the SIP arrangement, a certain amount is invested in mutual fund schemes on particular due dates. The invested amount has to be periodically auto-debited from the linked savings account.

To perform such an auto-debit of a fixed amount, you need to authorise your banker. Thus, it becomes mandatory to issue a bank mandate to authorise your bank for the SIP payment to be initiated.

Submitting a Bank Mandate Form

In the case of mutual fund investments, it is the investor who is required to issue a bank mandate. If you want to start a SIP in a mutual fund scheme of your choice, then you will be responsible for submitting a bank mandate. You will have to fill a simple form and send it to your bank branch where you have a savings account.

Once you issue a bank mandate, it authorises the particular asset management company (AMC) to direct a fixed sum of money from your account to the specific mutual fund scheme.

The process of Issuing a Bank Mandate Form

You can download the bank mandate form from the designated website. Fill in the requested details, sign, and send it to your AMC. The AMC will send it to your bank branch on your behalf to get an authorisation. Once the bank authorises, your SIP amount will be automatically collected. You will receive updates regarding the progress of the authorisation process.

Benefits of a Bank Mandate Form

Bank mandate is a one-time registration process. It allows you to initiate mutual fund SIPs in a less cumbersome manner. Once you issue a bank mandate, you will never have to issue individual cheques to the AMC repeatedly.

All kinds of monetary transactions in your folio will take place based on the instructions given in the bank mandate. As the interactions take place between your bank and AMC, you can be assured of the safety of the transactions. You will not be required to go through the same formalities ever again.

Authorizing the Debit Mandate for SIP

After investing, the investor needs to download the debit mandate. This form is then to be signed, and sent to the bank via courier, within 21 days from the date of making the investment. It can take anywhere from a month to 40 days for the authorisation process to go through. The SIP will start once the authorisation process is completed.

SIP Instalment Schedule

After the bank approves the debit mandate, the SIP instalments will be debited automatically on your chosen SIP dates, immediately post-approval. For example – if you have selected the 7th of every month as your SIP date, but your mandate is approved on the 25th of the month, then the 7th of the next month will be your first debit. This will be continued on the 7th of every succeeding month.

The process of Auto-Debit of SIP

When its time for your SIP, a debit request will be sent to your bank. The bank will then process your request (subject to availability of funds in your account) by transferring money to the respective fund house. After receiving the debit confirmation from the bank, the mutual fund house will invest that amount in units of the desired scheme, and the same will reflect on your investment dashboard.

The debit mandate thus has an important role to play in your SIP investments by helping you invest in a much convenient and hassle-free manner.