Capital market regulator SEBI has sought investor’s view on extending the cut-off time for redemption of liquid and overnight funds to 7 pm from 3 pm.
The working group of industry including AMFI and members of the Mutual Funds Advisory Committee has recommended a change in cut-off timings to determine applicable NAV with respect to redemption of units in overnight fund schemes from existing 3 pm to 7 pm.
MF Overnight Schemes
The change was proposed to allow time to stock brokers and clearing members to un-pledge units of MF overnight schemes and place redemption request with MFs, after the close of market hours.
They receive money invested in securities with one day maturity on the next working day. For meeting redemption requests, the overnight schemes do not have to make any sale transaction before market hours.
Instead, the overnight schemes, based on redemption requests, may decide not to reinvest the maturity proceeds to be received on T+1 settlement date. Since the money has to be invested every day, for the amount of redemption requests received on T-day, such amount is not reinvested on T+1 day and instead is used for payouts. Due to this, the timeline of redemption, whether being 3 pm or 7 pm, will not impact the funds valuation or capability to redeem investment, it said.
SEBI has sought public comments on the proposal before February 10.