Securities and Exchange Board of India has issued a circular regarding deployment of unclaimed redemption and dividend amount an instant access facility in overnight funds on July 30th, 2021 to all mutual funds, asset management companies, board of trustees of mutual funds, trustee companies end the association of mutual funds in India.[1]

Securities and Exchange Board of India has issued a circular dated October 6, 2017[2], which permitted overnight schemes under the scheme category. Some requests were made from the industry because of which the Securities and Exchange Board of India has taken few decisions.

The circular dated 25th February 2016[3] has been partially modified through this circular, and the paragraph read under paragraph A (1) (a) states that the unclaimed dividend amounts and redemptions will be allowed to be invested in a separate plan of overnight scheme, Money market mutual funds, liquid schemes floated by mutual funds specifically for the deployment of the unclaimed amounts, that are to be deployed and is currently allowed in call money or money Market instrument. The modified part has a proviso to it which states that such schemes where the unclaimed dividend amounts and redemptions are deployed shall be only Those overnight schemes, the liquid scheme, money market mutual funds, which are placed in A-1 cell. that is relatively low credit risk of potential risk class matrix and relatively low-interest rate risk as for Securities and Exchange Board of India circular dated 7th June 2021.

Paragraph A (1) (b) states that asset management companies (AMCs) will not be permitted to charge any exit load and the Total Expense Ratio (TER) will be capped at 50bps or as per Total Expense Ratio whichever is lower.

The circular dated May 8th, 2017[4] has been partially modified by the Securities and Exchange Board of India, and Para A (b) (ii) states that asset management companies and Mutual Funds can only offer IAF (Instant Access Facility) Only in liquid schemes and overnight of the mutual funds.

Modification made on circular dated 8th May 2016 is applicable with immediate effect; and all the asset management companies and mutual funds are advised to comply with modifications made in the circular dated February 25, 2016, from December 01, 2021.

Section 11(1) of the Securities and Exchange Board of India act, 1992 read with Regulation 77 of Securities and Exchange Board of India (Mutual Funds) Regulations, 1996 provides the power to say be to issue circular exercising the powers rested to protect the interests of investors and securities and to regulate and promote the development of the securities market.

[1]  Circular No.: SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/608

[2] Circular No.: SEBI/HO/IMD/DF3/CIR/P/2017/114

[3] Circular No.: SEBI/HO/IMD/DF2/CIR/P/2016/37

[4] Circular No.: SEBI/HO/IMD/DF2/CIR/P/2017/39

This Article Does Not Intend To Hurt The Sentiments Of Any Individual Community, Sect, Or Religion Etcetera. This Article Is Based Purely On The Authors Personal Views And Opinions In The Exercise Of The Fundamental Right Guaranteed Under Article 19(1)(A) And Other Related Laws being force In India, for the time being. Further, despite all efforts that have been made to ensure the accuracy and correctness of the information published, White Code Consulting & Governance shall not be responsible for any errors caused due to human error or otherwise.