Apart from using the UPI for paying bills, buying groceries or transferring money, you can now use UPI for investment in mutual funds too.
Since 2018, fund houses such as Aditya Birla Sun Life AMC, Baroda Pioneer AMC and IDFC Asset Management and distributors such as Funds India allows you to invest in mutual funds using the UPI.
So, let me tell you the procedure to use UPI to invest in funds.
Existing as well as new investors in mutual funds can invest using the UPI payment system. You can invest only via “Lump Sum” in your existing or new scheme. You can only pay first installment of your Systematic investment plan (SIP) using UPI. This is because SIP require standing instruction such as the electronic clearance service (ECS) mandate from a bank account. This facility is presently not available in the UPI for SIP investors.
However, it is important to have a bank account that can facilitate fund transfers through the UPI payment system. This bank 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 currently using your UPI application regularly, you must have linked your ID with your bank account to carry out investment in mutual funds. But, if you are a new UPI user, you, first, 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 as follows :
1. Choose UPI as the payment mode on respective AMC (Asset Management Company) website or using the mutual fund distributor e.g. Sharekhan, Angel broking etc. that supports the UPI interface while investing.
2. Provide your UPI virtual ID.
3. After that, you will receive a notification on your mobile phone from the UPI app you chose for payment.
4. Verify your transaction details and authorise the investment using the mobile PIN generated on the UPI app.
5. Now, your bank account will be debited and investment amount is transferred to the fund house.
You don’t have to log in to your net banking for investments in mutual funds using the UPI.
When you invest in mutual funds through cheque, NEFT or net banking then your money does not get deposited with the fund house immediately, it gets processed the next day. That’s why, mutual fund units are not allotted at the same day’s net asset value (NAV). Now, using the UPI interface, investment in mutual funds is instant, once you authorise the transaction. So, there is a possibility that units are allotted at the closing NAV of the same day.
At present, there is a per day transaction limit of ₹ 1 lakh fixed by the Reserve Bank of India (RBI). But this upper limit could vary from bank to bank. Therefore, it’s important for investor to verify with their bank before investing through the UPI.