From 1st Jan, Mutual Fund investors to get NAV only after funds reach AMC2 min read . Updated: 17 Sep 2020, 11:13 PM IST
- The new rule gets rid of an earlier provision which allowed purchases for schemes below ₹2 lakh to go through even if the money did not reach the AMC on the same day
- Additionally, the Sebi circular does not change the system of cut off timings for applications
From 1st Jan 2021, you will get the Net Asset Value (NAV) of a particular day only if your money reaches the fund house in question on that day, according to a Sebi circular issued today. This gets rid of an earlier provision which allowed purchases for schemes below ₹2 lakh (other than liquid and overnight funds) to go through even if the money did not reach the AMC on the same day. The provision about purchases below ₹2 lakh does not apply to liquid and overnight funds. Realization of funds on the same day is already required for purchases in such schemes.
In addition, the Sebi circular does not change the system of cut off timings for applications. If you submit the purchase application before 1 pm for schemes other than liquid and overnight funds, you get the same day’s NAV. If you submit it after 1 pm, you get the next day’s NAV. For liquid and overnight schemes, the rule is a little different. If you submit the application before 12.30 pm you get the previous day’s NAV. If you submit it after 12.30 pm you get the same day’s NAV. These cut off timings were brought ahead from 3 pm and 1.30 pm respectively in April 2020 due to the Covid 19 lockdown. The new circular requires that in addition to submitting the application before the cut off time, the money also has to reach the fund house on the same day to get that day’s NAV.
"The new system may be an issue for people who submit purchase orders very close to the cut off time. Their money might not reach the mutual fund in time for the order to go through. Also, customers of nodal banks (typically smaller banks) tend to have slower settlement cycles. They might be affected," said Gaurav Rastogi, CEO, Kuvera, an online platform for direct mutual funds. An AMC executive who spoke to Mint on condition of anonymity said that the cut off times mentioned above (12.30 pm and of 1 pm) would also apply to the receipt of money. However another senior official in the operations department of another AMC added that there was ambiguity about what time would qualify as money reaching on the same day in terms of the Sebi circular. He also expressed concern about SIP money reaching fund houses in time. Most SIPs are below ₹2 lakh in value and such investors are currently assured of the NAV of the SIP day even if there is a delay in the money reaching the AMC. The Sebi circular also tightened norms for mutual fund operations such as mandatory use of an automated order management system and scheme wise order placement if the fund manager is managing multiple mutual fund schemes.