SEBI Shifts Redemption Cut-Off Time for Overnight Mutual Funds

Published on April 25, 2025

SEBI Revises Cut-Off Timings for Overnight Mutual Fund Redemptions to Strengthen Client Fund Safety

In a move aimed at enhancing the safety and efficiency of client fund management, the Securities and Exchange Board of India (SEBI) has revised the cut-off timings for the redemption of units in overnight and liquid mutual fund schemes. These new regulations, which come into effect on June 1, 2025, are designed to ensure that stock brokers (SBs) and clearing members (CMs) invest client funds more prudently through secure overnight mutual fund schemes (MFOS).

What’s Changing?

According to SEBI’s circular dated April 22, 2025, Asset Management Companies (AMCs) will now follow new cut-off timings when processing redemption requests for overnight and liquid mutual fund schemes.

Here are the key updates:

For redemption requests submitted by 3:00 PM: Investors will receive the NAV of the day immediately preceding the next business day.
For requests submitted after 3:00 PM: The NAV of the next business day will apply.
For online redemption requests in overnight fund schemes: A special cut-off time of 7:00 PM will be allowed, giving more flexibility to digital investors.

This adjustment ensures better synchronization of fund redemption timings across offline and online modes while aligning with the unique structure of overnight mutual funds.

Why the Change?

The revised framework is part of SEBI’s broader mission to safeguard client funds held by intermediaries like brokers and clearing members. The regulator mandates that such funds be invested in Mutual Fund Overnight Schemes (MFOS)—which are low-risk instruments that invest solely in risk-free government securities maturing in one day.

This one-day maturity structure makes overnight funds highly liquid and secure, ensuring that investor funds are both protected and readily available for redemption when required.

SEBI has further clarified that MFOS units must be held in dematerialized (demat) form and be pledged with a clearing corporation. This system creates a layer of accountability and ensures that the funds are not diverted or misused.

Impact on Investors and Market Participants

For investors and intermediaries, this move introduces greater clarity and structure in how redemptions are processed. It encourages the use of secure investment avenues for idle client money and aligns with global best practices for fund safety and operational transparency.

By standardizing NAV applicability based on submission time and distinguishing between offline and online modes, SEBI aims to streamline mutual fund operations and strengthen investor trust.

Conclusion

SEBI’s decision to revise cut-off timings for overnight fund redemptions is more than an operational update—it’s a strategic step towards reinforcing the integrity of India’s capital markets. With increasing digital participation and rising expectations for accountability, such regulatory measures are essential to ensure that client funds are managed responsibly, securely, and transparently.

IT.