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The Securities and Exchange Board of India (SEBI), on 22 April 2025, announced a change in the cut-off timings to determine the Net Asset Value (NAV) with respect to repurchase or redemptions of units in mutual funds’ overnight schemes.
The modifications will provide clearing members (CMs) or stock brokers (SBs) more time after market hours to unpledge units of mutual fund overnight schemes (MFOS) and submit redemption requests.
The closing NAV of the day before the following business day will apply to applications submitted up until 3 p.m. According to Sebi's circular, applications submitted after 3 p.m. shall be subject to the closing NAV of the following business day.
It further stated that the 7 p.m. deadline will apply to overnight fund schemes in case of applications submitted online. The revised timings will take effect on June 1 2025.
Due to its overnight term and exposure to only risk-free government securities, mutual fund overnight schemes (MFOS) provide stock brokers and clearing members a unique way to deploy client money with minimum risk transformation.
SBs/CMs make sure that client money's investment is in MFOS that invest in overnight Tri-party Repo Dealing and Settlement (TREPS) and risk-free government bond repo markets. Additionally, these MFOS units must always pledge with a clearing corporation and maintain demat status.
According to Sebi's January consultation document, funds that individuals invest in securities with a one-day maturity transfer to overnight schemes the following business day.
"For meeting redemption requests, the overnight schemes don't 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,” SEBI had stated
It also stated, "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 shall not impact the funds' valuation or capability to redeem investments."
Sources:
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