Look at the new NAV rules applicable from Jan 1

From January 1, 2021, barring liquid and overnight funds, investors will get NAV once the money reaches the fund house irrespective of the investment amount.

So far, investors get same day NAV if they invest up to Rs.2 lakh before the cut off time. Now, NAV allocation will largely depend on efficiency of the financial system.

Now, let us take a closer look on NAV applicability rules:

For liquid and overnight funds, investors will continue to get previous day NAV irrespective of investment amount if they give purchase request before cut-off time. Further, if an investor invests his money and submits application form later, the fund house will follow time-stamping rules to allocate NAV i.e. the applicability of NAV will depend on the time of realization of funds. In such a scenario, investors will get previous day NAV if the fund house receives money before cut-off time and same day NAV if realization happens after cut-off time.

In addition, if an investor invests his money on Friday after cut-off timing or on Monday before cut-off timing, he will get NAV of Sunday.

For other category of mutual funds i.e. equity funds and debt funds, investors will get NAV upon realization of funds by the AMC. Even if your client has invested his money in the morning and for some reason if the money does not reach the fund house before cut-off time, the investor will not get same day NAV.

Simply put, if your client deposits cheque then realization of funds will be delayed due to time required for cheque deposit, associated settlement system in banks and so on.

Similarly, in online transactions, realization of funds depends on your clients’ bank efficiency.

However, fund house will allot NAV even if it does not get reporting from banks. At times, banks transfer money to fund houses but delay reporting.  In such a scenario, fund houses can buy units from pooled account and allocate the units later to your clients.

Please note that the brokerage will generate only after allotment of units to the investors. It has nothing to do with NAV applicability date.