What are the main
problems distributors and investors face while investing in mutual funds?
Having to deal with multiple application forms as well as cheques is one of the main problems faced by distributors. Today distributors have to fill numerous application forms, collect cheques from investors and deposit them at R&Ts/AMCs branches. The effort of handling forms and cheques takes more time than handling their clients’ financial needs. Further, investors may not get the same day’s NAV because distributors have to physically rush to submit the forms at the R&T office before the cut off time. With this in mind, we launched OTM- One Time Mandate. OTM allows an investor to authorize his/her bank to debit up to a certain amount daily based on the instructions given to DSP BlackRock Mutual Fund. So to give you an example, if a customer signs up a one time mandate form with an amount Rs. 50,000, that essentially acts as a per day limit for his investments. Later if he wants to make a lump sum investment of Rs. 40,000 and an SIP investment of Rs 10,000 in different schemes of DSP BlackRock, that is possible.
How does one
time mandate (OTM) help distributors and investors?
Distributors have to get their investors registered just once
by filling the OTM form. This registration process takes about ten to twelve days
generally. Once they are registered,
investors can simply invest through any mode – physical transaction slip
without cheque, mobile, and web.
OTM eliminates the need to sign any cheque and attach it with
the transaction slip. There are many issues that might crop up with cheques: distributors
have to be very careful that their clients fill out the cheque correctly
including scheme name, there is no over writing etc or else the cheque will be rejected.
Also in the current system, if an investor wants to invest in five different
schemes, he’ll have to write five different cheques. This is cumbersome. Also
we have been told by our distributors that at times a client is willing to
invest but he may not be carrying a cheque book and therefore an investment
opportunity is lost for the investor, the distributor and the Mutual Fund.
The OTM facility will help distributors and investors cut
down their paperwork and do away with all these hassles. While investing
through the physical mode, they can simply tick on the ‘Pay through OTM’ option,
which is available on account statements and transaction slips. Hence,
investing becomes as simple as filling a transaction slip for redemption or
switch, even in the case of investments in an NFO.
If the investor chooses to invest through an SMS, the
distributor can compose the SMS and send it to the investor. Investors can simply
forward this SMS to DSP BlackRock’s number viz 567672855. However, investors
have to send the SMS through the mobile number that is registered with us. We
confirm within 10 seconds that we have received the transaction. After further
quality check and verification, we send a final confirmation to the investor before
the end of the day. This will even apply in the case of an NFO.
While investing through our website, now investors don’t need to use internet banking or debit cards, instead they can use the OTM facility. Even investors whose banks don’t provide internet banking facility or even those investors, who are not subscribed to the bank’s internet facility, can invest through OTM. Further, net banking has limitations on the amount and the number of online transactions, which is not the case with the OTM mandate.
This facility would also reduce SIP registration time from 30 days to 5 days.
Why did SIP registrations take almost a month to register earlier?
It was taking up to 30 days because the system worked on the ECS mandate of RBI. Once we receive the forms we take seven days to complete the registration process at our end. Thereafter, we have to courier the ECS form to the investor’s bank branch address. We would not get any confirmation from the bank branch about ECS registration and have to assume successful registration which may lead to surprises later.
OTM works on NACH platform. There is no transit time involved in it. It is image-based processing. The NACH platform tracks the status of each mandate. Banks are obligated to confirm the registration within five days.
Hence, once the OTM registration is successful, any new SIP registration through a form or through an SMS can start within five days as against thirty days earlier. We target reducing the turn around time (TAT) of five days even further over the next few months.
How has been the response from distributors been so far?
We have met some group of distributors in New Delhi, Ahmedabad, Mumbai, Cochin and the response has been encouraging. They feel that OTM is a paradigm shift and could be a game changer. Till now, everybody had to invest through a cheque along with a transaction slip. This facility completely does away with the need for cheques.
Can investors
register multiple mobile numbers to transact?
Investors can register only one mobile number in one folio. However,
investors can register the same mobile number in any number of folios. OTM is
not restricted to one folio.
Are investors
required to register their cell numbers at their banks?
Not necessary. Investors may have registered a different
mobile number with the bank.
How has your experience with m-Invest been?
We got a good response from the market. Since the launch more than 5,000 investors have enrolled for it. We have received around 5,000 transactions aggregating to Rs. 5 crore investments till now.
How is OTM facility better than m-Invest?
Through m-Invest, investors could register only one bank and one folio. They could invest only in one scheme on an ongoing basis and not in an NFO. Also with regards to the general SMS based transaction facility available in the Mutual Fund industry, if a client wants to invest in any scheme, he needs to remember the scheme code of the specific scheme-plan-option. Hence, m-Invest could be used by sophisticated investors. OTM evolved after factoring in all these challenges.
OTM scores over m-Invest in many ways in case of SMS transactions. The transactions can be executed in a simple SMS format. We don’t believe that the investor or the distributor should remember the scheme codes. In our SMS format for OTM, there is no need for scheme codes. Apart from keywords (INV, RED, SWITCH, SIP) and the amount, the investor has to simply mention the folio number, the scheme name and other details in a free text format. We have got a good technology at the backend to ensure that as long as the first word is clear (e.g. 'INV" for invest, 'SIP' for Systematic Investment Plan, SWITCH for a switch and RED for redemption), it will work. For example: INV<space>10000<space>folio1234,ABCFundReg-Gr, ARNxxxx etc.
How
many OTM mandates and how many bank accounts can be registered in a folio?
There is no
restriction. You can register multiple, say even five to ten bank accounts in a
single folio. If you have two bank accounts mapped to one folio, you will need
to register two OTMs for each of these bank accounts. Each of these folios can
have different mobile numbers also.
How many banks have joined NACH platform as of
now?
It is a platform developed by National Payments Corporation of India (NPCI). As of now 48 banks have registered on this platform. Three months ago, only 14 banks had registered with NPCI. This platform was functional by mid-2013. Gradually, all banks will join. In the next three months, almost 96% of all leading banks will join this platform.
What is the daily limit of investments that can be done through OTM? Can investors increase this limit?
Investors can set a maximum limit on
however much they wish to invest on a daily basis. We urge our distributors to
give comfort to their investors to give an amount which is higher in order to
invest higher amounts later. There is no upper limit of investments. An
investor can invest an amount as high as Rs. 1 crore a day, if the OTM mandate
carries this limit. If they wish to
increase the limit, they’ll have to sign a new OTM mandate because the OTM form
is sent to the investor’s bank for registration.
Can one redeem close-ended funds through
OTM?
No. Investors can only redeem close-ended funds through the stock exchange as the units are listed.
What are your thoughts on online platforms and internet-based facilities? Wouldn’t they affect distributors because clients may go direct?
The world is moving online.
The new generation is getting tuned to internet banking and internet
transactions. No industry can afford to avoid having an online presence.
However, we believe that buying financial products online is different from
buying electronic products or other merchandise online. With respect to
financial products, a human touch and comfort is important, more so because the
investing public in putting in all their hard-earned money.
Also unlike other tangible
products, investments are not done with the objective of consumption and hence
instant gratification. Investments are made for the long-term with a goal in
mind; hence, online platforms or not, a financial distributor’s role cannot be
undermined. If investors see value in the distributor, they’ll continue to
invest through that distributor.
Our efforts have been to provide value-added services to distributors, continuously help upgrade their skill sets, so that they can help investors make financial decisions, and then offer transaction convenience solutions that reduce the efforts towards the execution for both distributors and investors. OTM is a step in that direction.
Do you capture the distributor’s ARN code when the investor registers for
OTM?
Yes, the OTM form has a provision for capturing the ARN code of the distributor.
