The unified payments interface (UPI) is popular among many as a preferred payment mode. According to the data from the National Payments Corporation of India (NPCI), transactions done through UPI in value terms were at an all-time high in October 2019. It crossed Rs 1.91 lakh crore.
Now, apart from using the UPI for paying utility bills, buying groceries or transferring money to others, you can also use it for investing in mutual funds.
Since 2018, fund houses such as Aditya Birla Sun Life AMC, Baroda Pioneer AMC and IDFC Asset Management and distributors such as FundsIndia allow you to invest in mutual funds using the UPI. Here is how you can use the UPI to invest in funds.
Who can invest in mutual funds using UPI?
Existing as well as new investors in mutual funds can invest using the UPI payment system. You can invest a lump-sum in an existing or new scheme. However, new investors opting for a systematic investment plan (SIP) in any specific scheme can only initiate first instalment using the UPI. This is because a standing instruction such as the electronic clearance service (ECS) mandate (monthly/quarterly) from a bank account is presently not available in the UPI for SIP investors.
Essentials for transacting
You need to have a bank account that can facilitate fund transfers through the UPI payment system. Also, these banks should allow you to link your bank account with UPI-based applications such as Bharat Interface for Money (BHIM), GooglePay and PhonePe.
If you are presently using UPI applications regularly, you will have a virtual ID linked with your bank account to carry out investment in mutual funds. But, if you are a new UPI user, you need to link the registered mobile number with your bank account. A virtual ID will be generated in the UPI application using your name or mobile number. The virtual id looks similar to your email ID – for example, yourname@bankname.
The investment process using the UPI app is similar to regular UPI payment transactions. First, you need to choose UPI as the payment mode on fund house’s website or using the mutual fund distributor’s platform that supports the UPI interface while investing. Then, you need to provide your UPI virtual ID. Next, you will receive a notification on your mobile phone from the UPI app you chose for payment. Here, verify your transaction details and authorise the investment using the mobile PIN generated on the UPI app. Immediately, your bank account will be debited and investment amount is transferred to the fund house. You don’t need to log in to your net banking for investments in mutual funds using the UPI.
Advantages for investors
You can invest in mutual funds through various modes such as net banking, national electronic funds transfer (NEFT) and cheques from your bank account. Now UPI too is an avenue to do so.
Harshil Morjaria, a Mumbai-based certified financial planner of ValueCurve Financial Solutions says, “When you invest in mutual funds through cheque, NEFT or net banking, the money does not get deposited with the fund house immediately; it gets processed the next day. So, mutual fund units are not allotted at the same day’s net asset value (NAV) you were looking for while investing.” Now, using the UPI interface, investment in mutual funds is instant after you authorise the transaction. So, there is a possibility that units are allotted at the closing NAV of the same day.
Limitations of the interface
At present, there is a per day transaction limit of Rs 1 lakh fixed by the Reserve Bank of India (RBI). Rohit Pawar, financial advisor at Kuber financial services says, “Even this upper limit could be reduced as it varies depending on the bank enabling the UPI facility. So, it’s important for you to check with your bank before investing through the UPI.”