It’s amazing to think of how the payments landscape in India has evolved since the innovation of UPI. No matter what the transaction is, today’s consumers quickly pull out their smartphones and open their UPI apps to make payments. UPI quickly scaled up since its innovation and has become one of the most preferred payment modes for most people.
UPI has made its mark in both P2P (Person to Person) and P2M (Person to Merchant) transactions. And, according to NPCI data, UPI based digital payments for July 2019 touched 822.2 million, which is enough to declare UPI as the reigning champion of the payments throne.
So, why limit UPI only for making day to day transactions? Why not use UPI for investing in mutual funds?
UPI for mutual funds investments
Why choose UPI when I can make payments via other payment modes?
If this is what you’re thinking, read on.
Admittedly, there are many payment modes you can choose to make investments in mutual funds. But, UPI facilitates instant, secure, and seamless payments, allowing you to pay directly from your bank. And, while you do so, you don’t even have to use your card.
Why UPI makes good sense for mutual funds investments
According to the mutual funds’ guidelines, if your investment is above Rs 2 lakh, units are allotted only after your money is deposited with the fund house. If you happen to invest a sum higher than Rs 2 lakh via cheque or netbanking, there’s a high probability that your money does not get deposited with the fund house immediately.
And, we all know how the market fluctuates. If your money ends up getting deposited after two days from when you transacted, the unit value can change by more than just a negligible margin.
This is why UPI makes sense for investing in mutual funds. With UPI, your money is transferred the moment you authenticate your transaction
In liquid funds, on the other hand, it really makes no difference as to how much you invest in mutual funds. You will be allotted with the units only once your money gets deposited with the fund house. And UPI makes all the difference here.
Consider you bought liquid fund units via online banking. In this case, there’s a high chance that the money is deposited to your fund house, the next day. On the other hand, if you use UPI to make this investment, the money gets transferred immediately.
The best part is, you don’t have to remember your netbanking username and password anymore. All you have to do is make a note of your UPI ID or your VPA. And, even if you don’t remember, you can simply open your UPI app to view your UPI ID.
Who can use UPI for mutual funds
Pretty much, everyone!
Whether you’re already investing in mutual funds or not, you can still use UPI as a payment mode to invest in mutual funds. You can perform transactions like lump-sum investments, SIP, and more using UPI.
If you already use UPI regularly, you already have a UPI ID associated with your UPI app. If you aren’t a UPI user, you’ll have to create a UPI ID to use the payment mode. And, it’s quick and easy.
[ Suggested reading: Everything You Need to Know About UPI ]
There are fund houses like Aditya Birla Sun Life Asset Management Co. Ltd, IDFC Asset Management Co. Ltd, and more that allow UPI as a payment mode to make investments in mutual funds.
How your UPI transaction works
Ideally, the way you’d transact via UPI to invest in mutual funds will be pretty much the same way you’d carry out UPI transactions.
When you choose UPI as the payment mode, you’ll be prompted to input your UPI ID. And, once you do so, you’ll receive a notification on your mobile phone from the UPI app you use, requesting you to authenticate your transaction. Once you select it, you can also view the details of your transaction.
Next, you have to provide your mPIN to authenticate your transaction. And immediately, your money is debited from your bank, reaching the destination, your mutual funds’ fund house.
Mutual fund investors can now buy SIP via UPI – RBI
RBI has taken yet another initiative to promote digital payments in India. Last Friday, RBI announced that it would allow e-mandate on recurring payments via UPI.
This means consumers will be able to make recurring payments towards insurance premiums and mutual fund SIPs using UPI, which was a facility that was only available on cards and wallets.
And, there you have it! A simplified means to invest in mutual funds, using UPI.