Since February 1, 2021, mutual fund investors have been getting the same day’s net asset value, or NAV, only if both the application/transaction as well as the money reaches the mutual fund’s bank account before 3 p.m. on a business day for equity and debt funds.
In the case of liquid and overnight funds, if the application/transaction is received up to 1.30 p.m. and funds are credited to the scheme account before the cut-off time on the same day, you will get the previous day’s NAV. If the application/transaction is received by the fund house after 1.30 p.m. on a day and funds are credited to the scheme account on the same day, you will get the closing NAV of the same day.
Before February 1, transactions up to Rs 2 lakh were exempt from this rule. That means, if your application/transaction reached the official point of acceptance or fund house before 3 p.m., say on January 18, 2021, but the money reached the scheme account the next day January 19, you were getting the closing NAV for January 18. From February 1, 2021, this threshold of Rs 2 lakh has been done away with for all types of funds.
The new rule was already applicable for purchase transactions under liquid and overnight funds. Now, it has been extended to all categories of funds irrespective of the investment amount. The new norm is applicable for all modes of transactions – physical, online platforms such as exchange platforms, online channel partners and Mutual Fund Utility. There is no change in the existing cut off timings for purchase transactions.
All types of transactions such as initial purchase, additional purchase, systematic investment plan, switch in, systematic transfer plan and redemptions fall under the purview of this new rule. For instance, if your SIP is debited on 10th of every month, till February 1, you were getting the NAV of 10th day (if it is a business day) irrespective of the date on which the money was received/credited to the mutual fund’s bank account. As per the new rule, you will be allotted the SIP units at the NAV for 10th only if the money is received/credited to the mutual fund’s bank account before 3.00 p.m. on 10th. Else, the SIP units will be allotted at the NAV of the next business day on which funds are received before the cut-off time which is 3 p.m.
Cut off time for liquid and overnight funds
- Cut-off time for redemptions/switches: 3 p.m.
- Cut-off time for subscriptions/purchase: 1.30 p.m.
Cut off time for equity and debt funds
- Cut-off time for redemptions/switches: 3 p.m.
- Cut-off time for subscriptions/purchase: 3 p.m.
The applicability of same day NAV is crucial for investors investing or redeeming large lumpsum money especially when the market is rising or falling. The new norms should not impact investors investing for the long term.
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