SEBI Revises Mutual Fund Cut-off Timing: What You Need to Know?

In a recent update, SEBI revised the mutual fund cut-off timings to enhance the transparency and consistency in the NAV calculation process. These changes were made to make the transaction process more predictable for investors.

Let's have a look at the key changes and how they impact your mutual fund transactions, especially with regard to the payment modes and types of funds.

Payment Mode and Its Impact on NAV

The cut-off time for mutual fund orders depends not only on the payment mode but also on the type of fund you are investing in. The key aspect here is that the timing for calculating the Net Asset Value (NAV) for a mutual fund order is directly linked to the time at which the payment is processed.

Below is a breakdown of how various payment methods affect the cut-off time:

• It’s important to note that for payments made through Net Banking, same-day NAV will apply only if the payment comes from one of the select banks listed above. 
• If the payment is processed through other banks, the NAV will be applied as of the next business day.

Cut-off Times Based on Fund Types

The cut-off time for mutual fund orders also varies depending on the type of fund you are investing in. The applicable NAV for transactions under mutual fund schemes is determined as follows:

Purchase Orders

• Orders placed on Saturdays, Sundays, and other market holidays will be treated as orders placed on the next business day.

• Payments through UPI transfers usually result in same-day NAV if you place the order before the cut-off time. 

• Deposits via net banking will not result in same-day NAV unless made from select banks like Axis Bank, ICICI Bank, HDFC Bank, Yes Bank, or SBI Bank. In these cases, same-day NAV will apply. For other banks, the NAV will be available on the next business day.

• Sometimes, when you make the purchase before the cut-off time, but funds are not received before the cut-off time, your order is placed on the next business day. Accordingly, you get the next business day NAV.

How Does This Cut-off Timings Impact Your Investments?

Understanding these updated cut-off timings can help you plan your investments better.

• For Liquid Funds: If you're investing in a Liquid Fund, make sure to place your order before 12:00 noon if you want your transaction to be processed at the same-day NAV. This is especially important if you're making time-sensitive investments.
  
  
• For Equity and Debt Funds: Orders placed before 2:00 PM will get the same-day NAV, but orders placed after 2:00 PM will get the NAV of the next business day.
  
  
• Payment Mode Considerations: If you are making the payment through net banking, it's critical to ensure that the payment is processed through one of the select banks to qualify for the same-day NAV.
  
  

How to Ensure You Get Same-Day NAV?

To get the same-day NAV for your mutual fund investment:

• Invest in Liquid or Overnight Funds: Ensure you place your order before 12:00 PM to qualify for same-day NAV.
  
  
• Invest in Equity, Debt, or Hybrid Funds: Place your order before 2:00 PM.
  
  
• Use Supported Payment Methods: For net banking payments, ensure your payment is made from one of the supported banks (Axis Bank, ICICI Bank, HDFC Bank, Yes Bank, SBI Bank).

Redeem Orders and SWP Orders

The cut-off time for placing redeemed orders is 3 pm. Placing your redemption order before the cut-off time means you’ll get the following: 

• NAV of the day immediately preceding the next business day in case of liquid/overnight funds

• NAV of the same day in case of other funds

Note that OTP verification is now mandatory for processing your redeem/SWP orders. If your order is not verified with an OTP, the order will not be processed further by the fund house. Your NAV would be dependent on when the OTP is verified.

Switch and STP Orders

Switch and STP orders are a combination of purchase & redeem orders. Groww’s cut-off time for switch-out orders is 3 PM, and switch-in orders are processed only after the switch-out leg is settled. So, NAV for switch-in orders is determined only after the switch-out order is processed.

Note that OTP verification is now mandatory for processing your switch/STP orders. If your order is not verified with an OTP, the order will not be processed further by the fund house. Your NAV would be dependent on when the OTP is verified.

What Will Change for My SIP Orders?

There are primarily two ways to pay for a SIP instalment: AutoPay and BSE Mandates. Here’s how the NAV and order completion dates will change after February 1, 2021:

AutoPay:

For investors with SIP on AutoPay, there will be no change in the applicable NAV date and order completion of your SIP orders.

BSE Mandates:

For investors with BSE mandates (Biller and One-time mandates), until now, BSE was deducting the SIP instalment amount from your bank account directly on the SIP due date and the order completion was happening on T+1 day.

Due to the same-day NAV change implemented from February 1, 2021, the instalment amount will be deducted on T day by BSE and fund realisation at BSE end is T+ 2/3  business days, and the expected completion date for these orders will change from T+1 business days to T+ 4/5  business days from BSE end.

Hence, the order completion date and NAV date are pushed for all BSE mandates( Biller and One-time mandates).

Note:
• T is the transaction/due date for your SIP instalment.

• All the dates mentioned are working days. Any holiday/weekend in between will result in the extension of this date.
• These are only tentative dates by BSE and are subject to change.

How do I find out whether my mandate is a BSE mandate( Biller and One-time mandate) or Autopay?

Here are a few steps to know which mandate you have:

• Go to the Profile section on the app
• Find the ‘My Account’ section
• Select Bank and Autopay
• You will see your verified bank account on the next page. Click on the bank.
• On the next screen, you will be able to see your account details and the mandate you have.

They will show up as follows:

Autopay Mandates

• Autopay via OTP
• Autopay via Form 
• Autopay via UPI Mandate

BSE Mandates

• AutoPay via Biller
• AutoPay via One-time mandate

What are Cut-Off Timings in Mutual Funds?

Many investors get confused between trading hours and cut-off timings. While trading hours are the allotted periods for buying or selling mutual fund units, cut-off timings determine the Net Asset Value (NAV) at which you can buy or sell mutual fund units. Mutual fund cut-off time is different for different types of funds.

For all funds except liquid funds, if you buy/invest in a mutual fund before the cut-off timing, you can receive the NAV on the same day. 

In September 2020, SEBI added another clause. To get the same day’s NAV, your money should reach the AMC on the same day, too. In case you made a transaction before the cut-off timing and due to some reason the money did not reach the fund house, you may get the next day’s NAV.

Happy Investing!