The liquidity of liquid mutual fund (MF) schemes would get hampered as market regulator Securities and Exchange Board of India (SEBI) has asked Association of Mutual Funds in India (AMFI) to inform all Asset Management Companies (AMCs), Register and Transfer Agents (RTAs) about charging exit loads in liquid MF schemes.
Investors prefer to park their short-term and emergency funds in liquid schemes as redemption requests may be put seven days in a week and the money would get transferred very next day to the bank accounts of the investors at NAV of the same day provided the request is put till 3 pm.
To make the seven-days-a-week redemption possible, the NAV of liquid funds are calculated even on Saturdays and Sundays, while NAV of other MF schemes are not calculated on the days stock markets remain closed.
As a result, investors – especially corporate investors, who used to park huge amount of money for a day or two, during a deal is negotiated – and others who park their emergency funds in liquid schemes, charging of exit load would be a dampener.
In its letter SEBI has asked AMFI to ensure that uniform exit loads are charged by AMCs on redemption made within 7 days of investment in liquid schemes.
The exit loads would be levied on a graded basis in liquid funds as under:
The SEBI has also asked AMFI to take prior permission from the market regulator before making any changed in the exit load structure in liquid schemes.
However, AMFI would review the rate structure annually in consultation with SEBI, as interest rate scenarios may change with the passage of time.