SEBI has deferred the implementation of swing pricing framework for mutual fund schemes to May 1, 2022 on the request of the Association of Mutual Funds in India (AMFI).
The framework, which is aimed at discouraging investors from making large redemptions from debt funds, was to become applicable from March 1.
SEBI had announced the introduction of swing pricing mechanism in India in September 2021.
What is swing pricing?
Swing pricing is a concept which allows AMCs to change NAVs when there is heightened redemption or massive inflows. They can lower the NAV by a certain percentage in case of big outflows and increase it when they see high inflows.
The purpose of swing pricing is to preserve value of debt funds during tough times. A reduction in NAV demotivates investors who are looking to redeem and attracts fresh inflows during difficult times. Hence, it ensures stability for the debt fund.
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