You can now redeem up to Rs 50,000 of your mutual fund money instantly

business

Updated: Apr 27, 2017 10:26 IST

The Securities and Exchange Board of India (Sebi) on Wednesday announced sweeping changes in norms relating to mutual funds, public issues, capital raising and commodity derivatives after its board met for the first time under new chairman Ajay Tyagi.

Sebi allowed new investment and redemption routes in mutual funds; tightened initial public offering (IPO) norms to ensure that funds raised are not misused; eased existing capital-raising norms to help banks deal with rising bad loans; and announced changes in securities contracts norms for better integration of the commodity derivatives market with the securities market.

Investors can instantly redeem liquid mutual funds up to Rs 50,000 a day, or 90% of the folio value, whichever is lower. Currently, money from redeeming a mutual fund gets credited to a customer’s account only on the next working day or two days after the request if it is not done through the immediate payment service (IMPS), placing liquid funds at a disadvantage to bank fixed deposits. While some funds already provide this instant redemption facility, Sebi has capped the limit at Rs 50,000.

Sebi also allowed investors to use e-wallets to buy mutual funds of up to Rs 50,000 per financial year. This move could potentially increase inflows into India’s Rs 18 lakh-crore mutual funds market. However, redemptions of such investments will flow back to the bank account of the unit holder.

The regulator said e-wallet issuers must not offer any incentive such as cash-back payments. It also stipulated that only e-wallet balance loaded through cash or debit card or net banking (and not credit cards) could be used for such investments.

“This is an enabling provision and will help the industry in on-boarding new investors,” said A Balasubramanian, MD and CEO of Birla Sun Life Asset Management Company.

Sebi also gave the green signal for options contracts in commodity derivatives, and integrated broking activities in equity markets and commodity derivatives markets under a single entity. These two issues were highlighted by finance minister Arun Jaitley in the last two budgets.

For options trading, Sebi is proposing to amend the Securities Contracts (Regulation) (Stock Exchanges and Clearing Corporations) Regulations, 2012. This will allow commodity exchanges to launch options products that can be settled by converting them to futures a day before the expiry of the contract.

“Options would complement existing futures contracts. Options would attract domestic hedgers to hedge on exchanges,” said Mrugank Paranjape, MD and CEO, Multi Commodity Exchange of India Ltd.

The detailed guidelines for trading in options on commodity derivatives exchange will be issued by Sebi, the market regulator in a statement.

Sebi will also amend stock brokers’ regulation so that it can integrate stock brokers in equity and commodity derivative markets. This will enable the same entity to operate in both markets.

“This step will reduce costs for financial intermediaries and give them more opportunities since it will be easier to approach equity (and commodity) clients,” said Chintan Modi, executive V-P at securities house IIFL.

Sebi also made it compulsory for companies to appoint a monitoring agency if their capital market issue size (excluding offer-for-sale component) is more than Rs 100 crore. Earlier, the floor was Rs 500 crore.

Monitoring agencies will have to submit their report every quarter now (from half-yearly earlier) and companies will have to publish this report on their websites besides sending to stock exchanges, Sebi said.