Securities and Exchange Board of India (SEBI) has announced revised cut-off timings for determining applicable net asset values (NAVs) for redemptions from overnight mutual fund schemes. These changes form part of the operational implementation of the new upstreaming framework introduced for stockbrokers and clearing members, according to the market regulator.

 

Background on Upstreaming Framework

In December 2023, SEBI issued a circular mandating stockbrokers and clearing members to "upstream" or transfer all clear client credit balances to clearing corporations daily. This regulation aims to protect investors by ensuring their funds are either held as cash, secured through fixed deposit receipts, or invested in mutual fund overnight schemes with appropriate pledging arrangements.

 

To facilitate this process effectively, SEBI collaborated with a working group from the mutual fund industry and the Association of Mutual Funds in India (AMFI) to propose adjustments to the cut-off timings that determine applicable NAVs when investors redeem units from overnight funds.

 

New Cut-off Timing Guidelines

After considering public feedback, SEBI has updated its master circular for mutual funds dated 27 June 2024, implementing the following revised cut-off timings for overnight and liquid fund schemes:

 

The regulator defines a business day as one when money markets are open and accessible.

 

Implementation Timeline

These revised timing regulations will take effect from 1 June 2025.

 

The changes reflect SEBI's ongoing efforts to streamline operations between brokers, clearing members, and mutual fund operations while maintaining robust investor protection mechanisms. The extended cut-off time for online transactions in overnight funds particularly acknowledges the growing importance of digital platforms in financial services.

 

Market participants will need to adjust their operational processes to accommodate these new timings, which are designed to work in harmony with the broader upstreaming framework that aims to reduce systemic risks in India's capital markets.