Mutual funds can now invest unclaimed redemptions and dividends in overnight funds. Till now, they were allowed to park such amounts only in liquid and money market funds.
In a circular issued on Friday, SEBI has also added a condition that such investments can only be made in funds that fall in safest category (A1) of recently introduced risk class matrix. This implies that the funds should carry minimum credit and interest rate risk.
The TER of such funds cannot go beyond 50bps or TER of direct of plan, whichever is lower, said SEBI.
Debtguru Joydeep Sen said the decision might be the result of the fact that overnight funds are the most conservative options in mutual funds.
Instant access facility extended to overnight funds
SEBI has permitted mutual funds to provide instant access facility in overnight schemes. Earlier, this facility was only available for liquid funds.
"MFs/ AMCs can offer Instant Access Facility (IAF) only in Overnight and Liquid Schemes of the MF," the circular issued by SEBI stated.
With this, investors can get their money instantly on their bank account if they redeem their investments from select overnight funds.
