SEBI approves AMFI’s proposal on graded exit loads on liquid funds

The Securities and Exchange Board of India (SEBI) has reportedly approved the Association of Mutual Funds in India’s (AMFI) proposal to formalise the graded exit loads on liquid funds.

Earlier in June, SEBI had addressed the issue concerning the stability of liquid funds due to the increased investor inflows and outflows. SEBI also announced that the market regulator would soon formalise an exit load structure for a period of up to seven days.

To ensure that the continually changing interest rate scenario does not impact the market, SEBI added that AMFI would be reviewing the exit load structure on an annual basis in consultation with the market regulator. 

As per the revised structure, liquid funds with a one-day holding period will attract an exit load of 0.007% and two-day holding period will draw an exit load of 0.0065%.

Also Read: SEBI Comes up With New Guidelines for Depository Receipts

In the same line, a three-day holding period will draw a 0.006% exit load. Also, the four-day and five-day holding periods will attract exit loads of 0.0055% and 0.005% respectively.

While the six-day holding period draws a 0.0045% exit load, liquid funds with a seven-day holding period will not attract any exit load. According to reports, the revised exit loads will be effective from 19 October 2019.

In a letter, SEBI also mentioned the new cut off timing in liquid funds. With effect from 21 October 2019, the cut off schedule will be preponed from 2 p.m. to 1:30 p.m.

For any clarifications/feedback on the topic, please contact the writer at viswanathan.v@cleartax.in