NAV date allotment from Feb 1, 2021


Update as on Jan 1, 2021: Earlier this change was supposed to be applicable from Jan 1, 2021. It'll now be applicable from Feb 1, 2021.

As per the recent SEBI circular there are some changes in the Net Asset Value (NAV) allocation for all the investment transactions from Feb 1, 2021 onwards.

Let’s first understand how your money reaches the Mutual Fund companies when you make an investment via different payment methods since this will affect the NAV allocation date going forward.

  • Netbanking/UPI - When you make an investment through netbanking or UPI, the money gets debited from your account and goes to the payment partner’s account (eg Razorpay). You might have noticed that even if you make an investment in 3 different funds, a single debit happens from your bank account. The payment partner then splits the total amount and forwards the individual fund amounts to the respective Mutual Fund companies. The transfer of money from the payment partner to Mutual Fund company does not always happen in real time. It can sometimes take an extra day or two depending on the processes set at the payment partner’s and the receiving bank’s end.

  • NACH/E-mandate (Auto-debit) - When an investment (lumpsum or SIP) is made through NACH or E-mandate this is what happens:

NAV

This complete process may take up to 1-3 working days.

Now let’s see how the NAV used to be allocated till now (till 31st Jan 2021).

Mutual Fund companies used to process transactions in liquid mutual funds only after they received the money in their bank account. So if you invest in a liquid fund using auto-debit, it may be possible that you get the NAV of 1-3 days later depending on when the money actually reaches the MF company.

Same goes for all investments above Rs 2 lakh in value. They were processed by the MF companies only after the money reached their account.

For investments in non-liquid/overnight funds (i.e. all equity funds and other debt funds) of amount below ₹2 Lakhs made before the cut off time, Mutual Fund companies allotted the NAV of the same day irrespective of whether the investment amount reaches their account or not. If the money then never reached their bank account then Mutual Fund companies would reverse the investment transaction.

For e.g. for a lumpsum investment in Axis Long Term Equity Fund for ₹10,000 on 15th December before the cut-off, you would get the NAV of 15th December itself. This would be the case even if the money is actually credited to the Mutual fund account by the payment partner on 16th December or 17th December (which could happen when paying via E-mandate for example).

As you can see, this not only created operational overhead of reconciling and then reversing transactions in cases when money did not reach the Mutual Fund company (e.g. in case of insufficient balance for a SIP done via via e-mandate), it also created a loophole in the system which could potentially be abused.

New NAV allocation rules

In order to avoid this overhead and loophole SEBI has mandated that from Feb 1st 2021, all investment transactions, irrespective of amount and type, will be processed by the Mutual Fund companies only when the money reaches their bank account.

Based on current money transfer systems via banks as explained above, we have come up with likely NAV allotment dates for different types of investments and payment methods available on Niyo Money. Please note that to ensure safety and regulatory compliance, the money never goes through our accounts and directly goes from your bank account to the Mutual Fund companies’ account directly via the payment partners so we have no control over the timelines.

screenshot-docs.google.com-2021.01.04-10_54_06
*These are the most likely but not guaranteed timelines. NAV date could be later than that mentioned here. The money movement is dependent on the banking systems and we have no control over them.

T = Day on which transaction is made or next business day if the transaction is made on a non business day. For SIP transactions, T means SIP date. T+1 means one business day after the transaction date, T+2 means two business days after the transaction date and so on. So for eg. if a transaction is made on Friday (T) then T+2 will mean Tuesday. All Saturdays and Sundays are non business days for the MF companies.

There are no changes in the NAV allocation for redemption transactions.

**Likely NAV Date for Switch In transactions

screenshot-docs.google.com-2021.01.04-11_04_27
Intra scheme = Switch within the same scheme but different plan. Eg. Switch from Axis Long Term Equity - Regular - Growth to Axis Long Term Equity - Direct - Growth.

Inter scheme = Switch in a different scheme of the same MF company. Eg. Switch from Axis Long Term Equity - Regular - Growth to Axis Liquid Fund - Regular - Growth.

Important Note:

This is a big change and requires coordination and efforts amongst platforms like us, RTAs like CAMS and Karvy, Mutual Fund companies, payment gateways and NPCI. It may take some time for various stakeholders to streamline their processes around this change. Based on this, we’ve been told to expect some deviation from the likely NAV allotment dates (mentioned in the table above) for the first couple of months. As and when we have more information on NAV allotments we will keep you informed.

After NAV Allocation

Each Mutual Fund company executes your transactions based on the applicable NAV. They send you a transaction confirmation, via email and/or SMS, with details of investment amount, units purchased, and the corresponding NAV within 5 business days after executing the transaction.

Mutual Fund companies then send the confirmation to the platforms with the same details of investment including the allocated NAV. We update the investment on your Niyo Money dashboard on the same day that the Mutual Fund company sends us the transaction confirmation. This can take up to 5 business days from the date of transaction.

On Niyo Money, you can check the expected and actual NAV date for each transaction on the transaction status page. You can click on any transaction row on the transaction page to reach the transaction status page.

Here's a screenshot for your reference:

Image-1

If you have any additional questions, we are always just a ping or an email away!