Mutual Fund New Rules from June 1: SEBI Revises Redemption Cut-Off Timings – Check What's Changing

Starting June 1, 2025, the Securities and Exchange Board of India (SEBI) will implement new cut-off timings for redemption requests in Overnight and Liquid Mutual Fund schemes. This move is aimed at strengthening investor protection and ensuring smoother fund transfers within the market ecosystem.

Earlier, the redemption timing was uniform across both online and offline modes, but SEBI is now bringing in separate cut-off times for these two modes under its updated regulatory framework.

New Redemption Timings from June 1

1. Offline Mode (Physical Redemption Requests)

Investors submitting redemption requests before 3:00 PM on a business day will be eligible to receive the NAV (Net Asset Value) of the previous business day.

However, if the request is submitted after 3:00 PM, the applicable NAV will be of the next business day.

2. Online Mode (Only for Overnight Schemes)

For investors using online platforms:

• If the redemption request is made before 7:00 PM, the NAV of the same day will be applicable.

• Requests submitted after 7:00 PM will be processed using the next business day's NAV.

A "business day" refers to trading days when the stock market is open. Weekends and holidays are excluded.

Why This Rule Is Being Implemented

According to a CNBC report, the revised redemption cut-off timings are part of SEBI’s Upstreaming Framework, which has been in effect since December 2023. This framework requires brokers and clearing members to transfer all client funds to the Clearing Corporation by the end of each trading day.

The aim is to:

• Enhance the security of investors' money

• Improve transparency in the mutual fund market

• Reduce operational risk and ensure timely fund settlements

What the Framework Includes

Under this new system, the following instruments must be transferred by brokers and clearing members:

• Cash funds

• Fixed Deposit Liens

• Pledged units of Overnight Mutual Fund schemes

By streamlining how these assets are managed and transferred, SEBI hopes to minimize the misuse of investor funds and strengthen regulatory oversight.

What Should Investors Do Now?

If you're planning to redeem your investments from Overnight or Liquid Mutual Funds, it’s now more important than ever to be aware of the timing:

• Online Investors get extended time till 7:00 PM to submit their redemption requests.

• Offline Investors must ensure that their requests are submitted by 3:00 PM to get the previous day’s NAV.

Any delay could result in getting a different NAV than expected, which may affect returns.

In Summary

SEBI’s decision to revise redemption cut-off timings for mutual fund schemes is a strategic step to:

• Safeguard investor funds

• Promote fair practices

• Increase transparency in the market

Whether you're investing or redeeming, make sure you're aligned with these new timings starting June 1, 2025 to avoid last-minute surprises and ensure smooth transactions.