SEBI is looking at the possibility of allowing fund houses to extend instant redemption facility to retail investors in liquid funds, said two people familiar with the development.
The market regulator is said have discussed this at the meeting of Mutual Fund Advisory Committee (MFAC) held today in Mumbai. In fact, sources privy to the development said that SEBI has formed a small group of MF CEOs to look into this matter. This group is expected to submit its recommendations to SEBI after assessing the modalities of this facility within a month.
One of the MFAC members who attended this meeting told Cafemutual that the market regulator is looking at allowing retail investors to withdraw of up to 2 lakh from liquid funds instantly.
Another official said who too was present in the meeting said that the idea is to replace savings bank account with liquid funds so that investors can get better risk adjusted returns post taxation.
Currently, investors have to wait for a day to get their money if they redeem from liquid funds (if they place redemption request before the cut off time). Also, if investors place a redemption request on a non-business day, say Saturday, the investor gets the redemption proceeds on Tuesday. This can be a frustrating experience for someone who needs money urgently.
Recently, two fund houses – Reliance and DSP BlackRock have launched instant redemption facility in their liquid funds which works 24x7. However, these fund houses have put a certain limit on redemption as they pay from their books to meet the redemption.
Earlier, Kothari Pioneer MF used to give facility of instant redemption from its money market fund through cheques but it was put to an end after RBI’s intervention.