NAV cut-off reform (February 2021)

Tue, 19 May 2026 00:00:00 +0000

In February 2021, SEBI revised the applicable NAV cut-off rule for mutual fund subscriptions, removing the same-day NAV benefit for amounts above Rs 2 lakh in liquid and overnight schemes. The reform was the most significant change to the applicable NAV / cut-off rule framework in years and was implemented to prevent operational arbitrage that some institutional investors had been exploiting.

For Indian retail investors, the February 2021 reform changed the operational expectations for large-lump-sum mutual fund investments. The previous “free pricing” of large amounts gave way to a “money-realisation” requirement, aligning Indian practice with international standards.

NAV cut-off time reform for mutual funds (1 February 2021)

Tue, 12 May 2026 00:00:00 +0000

The NAV cut-off reform effective 1 February 2021 was a fundamental change to the rules governing which net asset value (NAV) is allotted to a mutual fund investor’s purchase transaction, implemented by the Securities and Exchange Board of India through Circular No. SEBI/HO/IMD/DF2/CIR/P/2020/253 dated 31 December 2020. Prior to this reform, mutual fund purchases above Rs 2 lakh in debt schemes were allotted the same-day or next-day NAV if the transaction application was submitted before the scheme’s cut-off time, regardless of whether the investor’s funds had actually reached the AMC’s account. The reform mandated that the applicable NAV be allotted only after the investor’s funds were realised in the AMC’s bank account, regardless of the time of application submission. This change eliminated a timing arbitrage mechanism that had been exploited by large institutional investors and treasuries in debt funds.

NAV Cut-Off on WebNotes

NAV cut-off reform (February 2021)

NAV cut-off time reform for mutual funds (1 February 2021)