Starting June 1, the Securities and Exchange Board of India (Sebi) has introduced new cut-off timings for calculating the net asset value (NAV) on repurchase of units in overnight fund schemes. This move is part of Sebi’s efforts to improve how client money is managed in these funds.
WHAT’S CHANGED?
From June onwards, Asset Management Companies (AMCs) will follow new cut-off timings for overnight and liquid fund redemptions.
If a redemption request is submitted before 3 PM, the applicable NAV will be that of the day before the next business day. On the other hand, requests made after 3 PM will get the NAV of the next business day.
However, in the case of online redemption requests specifically for overnight fund schemes, a later cut-off time of 7 PM will be applicable.
In its circular dated April 22, 2025, Sebi stated, “The following cut-off timings shall be observed by AMCs with respect to repurchase of units in liquid fund and overnight fund schemes and plans and the following NAVs shall be applied for such repurchase. a. Where the application is received up to 3.00 pm – the closing NAV of the day immediately preceding the next business day; and b. Where the application is received after 3.00 pm –the closing NAV of the next business day.”
“Provided that in case application is received through online mode, the cut-off timing of 7 PM shall be applicable for overnight fund schemes,” mentioned the circular.
“The provisions of this circular shall come into force from June 01, 2025,” the circular added.
MOTIVE BEHIND THE CHANGE
Sebi’s aim is to make sure stock brokers (SBs) and clearing members (CMs) use client funds wisely by investing in secure overnight mutual fund schemes (MFOS). These funds only invest in risk-free government securities and mature in just one day, which helps protect the value of client money.
According to Sebi, MFOS units must always be in demat form and pledged with a clearing corporation at all times. This setup ensures the money stays safe and is easily redeemable when needed.
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