SEBI Proposes Change in Cut-off Time to 7 PM for NAV Calculation For Overnight MF Schemes

On January 20, 2025, India’s markets regulator, SEBI (Securities and Exchange Board of India), proposed a revision in the cut-off time for determining the Net Asset Value (NAV) of redemptions for overnight mutual fund schemes. The current cut-off time of 3 pm would be extended to 7 pm under the proposed change.

Mutual fund redemption refers to the process of selling back mutual fund units to the asset management company (AMC) in exchange for cash. This allows investors to exit the fund and receive the value of their investment.

Overnight mutual fund schemes invest in low-risk, short-term securities with a one-day maturity period. These typically include government bonds, repo markets, and tri-party repo dealing and settlement (TREPS), minimizing risk due to their overnight tenure. The proposed change is intended to improve the liquidity and efficiency of these schemes.

Objective of the Change

The change, outlined in SEBI’s consultation paper, aims to provide stock brokers and clearing members with sufficient time after market closure to un-pledge Mutual Fund Overnight Scheme (MFOS) units and initiate redemption requests. This extension would help streamline the process and reduce time pressures for brokers and clearing members handling client funds.

SEBI’s Rationale for the Change

SEBI cited recommendations from the Association of Mutual Funds in India (AMFI) and the Mutual Funds Advisory Committee (MFAC) to extend the cut-off time for redemptions from 3 pm to 7 pm. The regulator noted that units of overnight schemes must be held in demat form and pledged with clearing corporations.

Impact on Valuation and Redemption

SEBI emphasised that the proposed extension would not affect the valuation or redemption capability of these funds. Since overnight schemes invest in securities with one-day maturities, the timing of redemption—whether at 3 pm or 7 pm—does not impact the scheme’s ability to process redemptions or its valuation.

SEBI has opened the floor for public comments on the proposed change, inviting feedback until February 10, 2025.

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