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SEBI diktat: MF investors to get units only when schemes receive the funds

Unless intermediaries and platform providers tweak their systems, investors would not be able to get same-day’s NAVs

September 23, 2020 / 08:03 PM IST

If you are a mutual fund (MF) investor, you will now have to wait for a little longer to get your allotted units.

Last week, the Securities and Exchange Board of India (SEBI) said that MF investors would get units at the net asset value (NAV) of the day on which your amount gets credited to the MF scheme’s bank account. Earlier, this rule was only applicable for investments of over Rs 2 lakh. At the same time, any investment below this threshold could get the same day’s NAV as long as the transaction is initiated before the cut-off time. Presently, the cut-off 1 pm due to the COVID-19 crisis; the usual time was 3 pm earlier.

Even though SEBI’s move is aimed at bringing uniformity in the way NAVs are assigned, it would impact investors in differing ways depending upon their route of investment. Unless MF platforms and intermediaries are able to re-align their systems, investors would only be able to get same-day NAVs in very few cases. For now, if markets fall on a particular day and you wish to take advantage of the decline and invest some amount on the same day, it would only be possible in some scenarios from January 1, 2021: the day on which this rule comes into force.

I make online payments. So, I should get the same day’s NAV, right?

A typical internet transaction of buying or selling mutual funds takes place through a payment gateway. Even such transactions take a day for the funds to get credited to your mutual fund scheme’s bank account. But many fund houses tie up with banks to help investors deposit money on the same day. If you have an account with any of these banks and if you invest through your mutual fund’s website, only then will your funds reach your MF’s account on the same day. You will then get the same day’s NAV.


If I invest through online platforms and their apps, will I still not get the same day’s NAV?

No, you will not. Such apps and platforms also use payment gateways for accepting transactions. So, the funds will be credited to the scheme’s account on a ‘t+1’ or ‘t+2’ days basis. Investors coming through either of these channels will not get the same day’s NAV. In these routes, the investor’s funds would first hit the platform provider’s bank account before getting credited to the scheme.

Experts say payment gateway providers have the technical capability to conclude the transaction on the same day, but this may entail higher transaction fees. There is still uncertainty on whether payment gateways and the MF industry would be able to find a solution.

If I give a cheque today, will I get today’s NAV? 

This mode would work slower than an internet transfer. If you give a cheque, you could face a lag of at least two days. As things stand, such investors would not be able to get the same day’s NAV. While most investors have gone digital during lockdown, there are still segments of investors using cheques for their MF investments.

I invest through systematic investment plans (SIPs) and have already given a bank mandate to my mutual fund. So would the money not get credited into my mutual fund account on the same day?

Let’s say your bank has to be debited on the 7th of every month towards your SIP. This money is meant to be automatically transferred to your fund house on the 7th and the fund house is supposed to allot you units. But it might actually take a day for your money to reach your fund house, via the payment gateway. Till now, your fund house used to allot units on 7th because that was the SIP day registered, provided of course that your SIP instalment was less than Rs 2 lakh. In reality, money doesn’t always reach your fund house on the same day.

Henceforth, your fund house will only give you units the day your money reaches the scheme’s bank account.

Alright, what about systematic transaction plans (STPs), from debt to equity schemes then? If both the schemes are from the same fund house, would I get the same-day NAV in this case at least?

Not quite. Your STP may happen within the same fund house, but that doesn’t mean your money is lying in the same bank account. Your liquid fund and equity scheme are two different categories. An STP is, in reality, a redemption from your liquid fund and a fresh purchase in your equity scheme. So, despite a specific day being marked as the STP date, you would get the day’s NAV in your liquid fund (at redemption time), but the NAV of your equity scheme is usually that of a day later when your money actually gets credited.

Will SEBI’s new NAV rule impact redemptions?

The new ruling will not have any bearing on redemptions. As long as the investor initiates the transaction before the cut-off time, he or she will get the same day’s NAV.

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Jash Kriplani
first published: Sep 22, 2020 03:57 pm
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