The mutual fund industry, which has assets under management of about ₹40-lakh crore, will settle redemptions in equity schemes on the T+2 (trade plus two) cycle from February 1.
The decision comes close on the heels of equity markets adopting a T+1 settlement cycle for all stocks, shortening the settlement cycle by a day and crediting funds in sellers’ bank accounts one day in advance compared to the current process.
To pass on this benefit to mutual fund investors, the Association of Mutual Funds in India (AMFI) said it has decided all asset management companies will move to a T+2 redemption payment cycle for equity schemes and implement this uniformly with effect from February 1.
This will be applicable for all transactions received before the cutoff date on February 1 and processed at the closing NAV of the same day after allowing a couple of days for the settlement cycle or process to stabilise, it said.
A Balasubramanian, Chairman, AMFI, and Managing Director and CEO, Aditya Birla Mutual Fund, said the T+1 settlement cycle for Indian equity markets is a global first, and the mutual fund industry wants to pass on the benefit to investors by proactively adopting a T+2 redemption payment cycle for equity funds.
NS Venkatesh, Chief Executive, AMFI, said since the day SEBI announced the phased implementation of equity markets to a T+1 settlement cycle, the mutual fund industry has been preparing to shorten the redemption payment cycle.
The 44 asset management companies registered with SEBI are members of AMFI and manage assets across equity, debt, and commodities.