RTGS technical glitch hits liquid MF debt segment

PALAK SHAH Mumbai | Updated on February 25, 2020 Published on February 25, 2020

Liquid mutual funds, mainly in the debt segment, were hit hard by the technical glitch at the RBI-managed Real Time Gross Settlement (RTGS) payments system

Liquid mutual funds honour redemption request at 10 am and the money returns at 1.30 pm the same day. Many high net worth individuals, corporates, and banks park their money in debt schemes of liquid mutual funds and keep rotating it everyday. Liquid MFs yield more returns than the traditional savings account.

For instance, even huge quantities of money parked in banks, are invested by banks in liquid mutual funds. This is mainly because liquidity is ensured at a day’s notice, and there is no entry and exit load.

So, the money that is credited to the investor’s account in the morning comes back to liquid mutual funds on the same day at 1.30 pm, which is the cut-off time to invest at the previous day’s Net Asset Value (NAV).

But, on Tuesday, this cycle stopped and liquid mutual funds turned borrowers, as they could honour the redemption request only at around 1.30 pm. This, since both the primary and back-up servers linked to the RBI’s RTGS payment stopped working early in the evening on Monday and did not start till 1.30 pm on Tuesday.

Cut-off time for investors

The cut-off time for investors to put money in liquid funds of MFs had passed. If you submit an application before 2 pm but fail to transfer the money before the cut-off time, you will not be eligible for the previous day’s NAV. “There was chaos for MF managers of liquid schemes in the debt segment. They turned borrowers as a tech glitch at the RBI RTGS servers ensured no client could re-invest by 1.30 pm,” said the head of a Mumbai-based asset management company.


Published on February 25, 2020
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