Applicability of NAV upon realisation of funds: Will it impact your Mutual Fund SIP too?

The latest circular of the Securities and Exchange Board of India (SEBI) on Mutual Funds (MFs) would not only impact investments through cheques irrespective of the size and time of receipt of such application, but may impact other modes of investments also.

While payments through cheques take time in the clearing process, investments through demat and Systematic Investment Plan (SIP) may also face issues in getting the units allotted at same day Net Asset Value (NAV), feel some experts.

“We might see SIP transaction’s getting impacted as the SIP debits might not always reach the AMC’s in time for same day’s NAV but we hear that operation teams across AMC’s have already started to brainstorm and are engaging amongst themselves to ensure minimal disruption,” said Rajesh Cheruvu, Chief Investment Officer, Validus Wealth.

According to Arpit Arora, Passive Income Coach and Founder, AskTheWiseGuy, “They will get the NAV on the date of the clearing of the payment. So,if the clearance is on the same day then yes. This greatly depends on how they are doing the SIP.”

While Former Chairman of Bombay Stock Exchange (BSE) and Managing Partner at Ravi Rajan & Co, S Ravi thinks that the NAV of the SIP date would remains valid only if the Banking system enables fund transfer before cut off time, Ajay Sharma, Director & Designated Partner, InvestmentMitra Advisors LLP, from his ground experience, has witnessed that the date of funds debited to the investor’s bank account in many instances differ from the date of SIPs.

So, the probability is there that you may miss the same day NAV even if you take the SIP route and transfer funds automatically through ECS, EFT, NEFT, NACH registration.

Hence, Cheruvu feels that the uncertainty will increase for smaller ticket sizes as now they become dependent on the efficiency of the banking system.

“But on the flip side, All transactions greater than 2 lacs are being processed on the basis of realisation of funds even today without much issues. So it is just about replicating the process across the board going forward,” he says.