Sebi’s rule regarding NAV of overnight funds to come into effect on June 1

Capital markets regulator Securities and Exchange Board of India (Sebi) has introduced some changes with regards to the cut off time to determine net asset value (NAV) of overnight funds. 

Prior to this, SEBI had released a circular dated Dec 12, 2023 to ensure upstreaming of clients’ funds. The circular specifies the framework requiring stock brokers or clearing members to place all the clients’ clear credit balances to clearing corporations on end of day basis.

To make the upstreaming of clients’ funds in the form of pledge of units of mutual fund overnight schemes, a working group of industry participants recommended a change in the cut-off timings to calculate the applicable net asset value with respect to repurchase of units in the overnight fund schemes.

Overall, there are 34 overnight mutual fund schemes with total asset value of ₹62,458 crore. These refer to the income/debt oriented schemes which have a maturity of only one day. 

These are the changes which will come into effect from June 1, 2025 with regards to overnight schemes. 

Asset management companies will observe these cut-off timings with respect to repurchase of units in liquid funds and overnight fund schemes.

Cut off time to determine NAVs of overnight funds

A. When the application is received up to 3 pm, the closing NAV of day immediately preceding the next business day.

B. Where the application is received after 3 pm — the closing NAV of the next business day.

C. When application is received through online mode, the cut-off timing of 7 pm will be applicable for overnight fund schemes.

D. Business day does not include a day on which the money markets are closed or otherwise not accessible.

E. Signed by Lakshaya Chawla, Deputy General Manager, Investment Management Department, Sebi’s circular was released on April 22 and will come into effect on June 1, 2025.

The Sebi’s circular also highlights that the purpose of this circular is meant to protect the interest of investors in securities and to promote the development of, and to regulate the securities market.

In another news, Sebi has proposed enhancing investment limits for mutual funds in real estate investment trusts (REITs) and infrastructure trusts (InvITs) — in a move that will boost the real estate and infrastructure sectors.

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