Sebi Revises NAV Cut-Off Timings for MF Overnight Scheme Redemptions

On April 22, 2025, the Securities and Exchange Board of India (SEBI) announced a significant revision to the cut-off timings for determining the Net Asset Value (NAV) for the repurchase or redemption of units in Mutual Fund Overnight Schemes (MFOS). Effective June 1, 2025, the new rules aim to enhance operational efficiency for stock brokers (SBs) and clearing members (CMs) by providing additional time to un-pledge MFOS units and submit redemption requests after market hours. This change, initially proposed in SEBI’s January 2025 consultation paper, was recommended by the Association of Mutual Funds in India (AMFI) and the Mutual Funds Advisory Committee (MFAC).

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Revised NAV Cut-Off Timings

Under the revised guidelines, redemption applications received by 3:00 PM will be processed using the closing NAV of the day immediately preceding the next business day. Applications submitted after 3:00 PM will use the closing NAV of the next business day. SEBI has extended the cut-off time to 7:00 PM for online transactions, allowing investors to benefit from the same day’s NAV for late evening redemptions in overnight funds. Physical transactions, however, will retain the 3:00 PM cut-off. This flexibility is designed to streamline the upstreaming of client funds by SBs and CMs to clearing corporations (CCs).

Low-Risk Investment Features

MFOS, a low-risk investment avenue for deploying client funds, invests exclusively in risk-free government securities, such as overnight government bond repo markets and Tri-party Repo Dealing and Settlement (TREPS). These units must be held in dematerialized (demat) form and pledged with a clearing corporation, ensuring minimal risk transformation due to their overnight tenure. SEBI noted that overnight schemes invest in securities with one-day maturity, receiving funds the next working day. For redemptions, schemes use maturity proceeds instead of selling securities, meaning the extended 7:00 PM cut-off does not affect fund valuation or redemption capabilities.

Operational Efficiency for Brokers

The regulator emphasized that redemption requests received on T-day are not reinvested on T+1, allowing payouts without impacting the fund’s valuation. This change addresses the operational challenges of brokers who often reconcile accounts and process redemptions during market hours. By extending the cut-off, SEBI aims to align mutual fund house workflows with broker convenience, enhancing transparency and efficiency in India’s mutual fund sector. Investors and market participants are encouraged to adapt to these new timings to optimize their redemption strategies.

Conclusion

SEBI’s revised NAV cut-off timings for MFOS redemptions, effective June 1, 2025, enhance efficiency by extending online redemption deadlines to 7:00 PM. This change streamlines broker operations, ensures minimal risk via government securities, and aligns with India’s mutual fund sector growth, fostering transparency and investor flexibility in an evolving financial landscape.