SEBI flags concerns on instant redemption in liquid funds

The Securities and Exchange Board of India (SEBI) has expressed concerns over a few mutual fund houses allowing investors the option of instant withdrawal from their liquid schemes.

A SEBI official has expressed reservations over management of liquidity demand. “We need to think what parameters that go along with instant redemption. Are we going to provide instant redemption if a person clicks and we get the amount credited to the bank account? Mutual funds need to see how much of liquidity demand can be managed,” said G Mahalingam, whole-time member, SEBI said.

He further questioned whether mutual funds are prepared to keep a portion of the total assets in the liquid form to honour instant redemption.

In the recent past, a few fund houses have begun offering retail investors an option to withdraw upto Rs 2 lakh in a day. Investors who opt for this facility get the money in their bank accounts via the IMPS (immediate payment service) route.