How UPI is Making Mutual Fund Investments Faster?

As per reports by the National Payments Corporation of India (NPCI) and Reserve Bank of India, the value of digital transactions went up from Rs. 66.34 crore in 2013-14 to Rs. 207.98 crore in 2017-18. As the world shifts to digital transactions, mutual funds too are welcoming newer digital avenues for investors. The primary objective is to make mutual fund investments as easy as possible for an everyday investor.

Reduction in time

Fund houses are working on ways to reduce investing time in a mutual fund scheme to within twenty-four hours by offering UPI payments. Typically, it takes two to three days to get the units in your portfolio after the final transaction. Unit redemption also takes the same time. Currently, only liquid funds offer instant redemption. For the uninitiated, liquid funds are types of mutual funds that invest in money-market instruments and debt.

How does it work?

Presently, if you visit the website of your selected fund house to invest in a scheme, you can invest through debit card, internet banking, NEFT, RTGS or UPI. If you choose UPI, you need to have a virtual payment address (VPA) with your bank, provided your bank is listed on the NPCI platform. You can get your VPA through the BHIM UPI app or your bank app on your phone. On submitting your VPA on the fund’s website, the fund house sends you an alert through your app on the transaction along with a text message. You can authorise the transaction, and the money instantly gets transferred to your fund house.

Why invest through UPI payment?

As per mutual fund rules, if you invest more than Rs. 2 lakhs, units are allotted only after the money gets deposited in the fund house. However, if you invest up to Rs. 2 lakhs, units get allotted even if it takes a day or two for the money to be deposited in the fund house.

This is where UPIs make a difference. If you invest in a liquid fund through a simple internet banking transfer, the fund house may get the money only the next day. But under UPI, the money is transferred instantly.

For example, if you invest using internet banking on a Friday, the fund house will receive the money, the following week on Monday. As per mutual fund rules, you get previous day’s net asset value (NAV), that is Sunday’s NAV. However, if you invest using UPI, the money is transferred on the very same day. Thus, you can get Thursday’s NAV.

At present, you cannot buy units worth more than Rs. 1 lakh with UPI as per the limit fixed by NPCI. Currently, not all funds are on the UPI platform yet, but more fund houses are expected to join shortly.


With UPI payments making mutual fund investments easier, it is the best time to start investing now. Mutual funds have been performing well over the last few years with favourable mutual fund returns, especially liquid fund returns; hence, you may want to make an investment decision, based on your financial plan.

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