Being a regulatory body, the Securities and Exchange Board of India handles all regulations of mutual fund investment. All mutual fund houses require registering with SEBI and have to follow their rules. On 17th September 2020, SEBI came up with a circular that mentioned few changes for investors relating to net asset value or NAV of mutual funds in India.
NAV is per unit value of mutual fund investments. All investors can view the NAV of their fund where they invested on a per day basis. Value can move up and down each day. So, when you buy a unit of mutual fund through MF online platform, you are allotted net asset value for the mutual fund. New rules mention that NAV for all the mutual funds should be allotted to retail investors on the same day the invested fund is received by the fund house.
What does the SEBI circular mention?
SEBI circular states – “It is decided that in regard to the purchase of mutual fund scheme units, closing the NAV of the day will be applicable on which scheme is available for use, regardless of the time and size of the receipt of such an application.”
Previous net asset value rules
Previous NAV rule was based on whether investment amount was higher or lower than Rs. 2 lakh.
Investments below Rs. 2 lakh
In case investment was below Rs. 2 lakh, if the investment application was submitted before cut-off time of 1 pm, NAV then was allocated for the same day regardless of whether actual funds wererealised. If an application was submitted after the 1 pm cut off time, then the investor would receive the NAV of the next day.
Investments over Rs. 2 lakh
For investment of more than Rs. 2 lakh, the previous rule mentioned that the NAV that investor wouldreceive would be on the day when funds were received.
Current NAV rule
The new rule has removed Rs. 2 lakh for the NAV allotment. As per the previous circular, all the investments, regardless of their sizes,would be allotted the net asset value or NAV on the same day of receiving the funds by an AMC. Now receipt of only the application will not endow you NAV, the actual fund needs to be realised. For instance, if you invested Rs. 2 lakh on Monday through a cheque, as per the previous rules, you would have gotten the NAV allotment as on Monday, despite pendency of cheque clearance.As per the new rules, however, when you invest Rs. 2 lakh and submit your bank cheque and application on Monday, the NAV will only be given on clearance of your cheque and once the AMC receives your fund, may it be on a Wednesday or Thursday. Note that there are zero changes in cut off timings of the application procedure.