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Mutual Fund Withdrawals: Key Take-Aways on the New SEBI Guidelines

December 22, 2017

Mutual Fund Withdrawals: Key Take-Aways on the New SEBI Guidelines

Mutual funds continue to be one of the most popular types of investments among the people in India. So, to attract new investors many fund houses started offering instant withdrawals for the same.

This is because it generally takes about 24-48 hours for a person to redeem their mutual funds and get the amount in their bank accounts when opting the traditional route.

Mutual Fund

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Now, as per the latest guidelines by the Securities and Exchange Board of India (SEBI) that were released in April 2017, SEBI, the investors can now enjoy the facility with some limitations.
The following are some of the key highlights of the new rules:

  1. Limited Applicability of Instant Redemption
    It was DSP BlackRock and the Reliance Mutual Fund that started offering instant redemption facility to the investors. Then the AMCs also starting offering the same for the short-term funds. However, SEBI intervened and declared that the facility can only to be provided for the liquid funds.
  2. Limited Applicability Even in Liquid Funds
    Although SEBI has stated that the instant withdrawal facility is available for liquid funds only, not all liquid funds qualify for the same. For example, the Reliance Money Manager Fund is one of the select schemes that offer this facility. So, if an investor must ask their fund house if they are offering the facility or not, even when the funds in question are liquid funds.
  3. Withdrawal Limits
    The instant withdrawal amount was initially capped at Rs. 2 lakhs per day or 95% of the investment value (whichever is lower). However, as per the SEBI’s new guidelines, this limit is reduced to Rs. 50,000 a day or 90% of the investment value (whichever is lower). This was done to minimize the associated risks.
    Liquid Funds are short-term debt funds that have low risks. They can also be compared to savings account schemes because of their instant redemption facility.

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