Time stamping, cut-off time and applicable NAV
Which day's NAV a mutual fund transaction gets, and the stamp that decides it.
When an investor buys or redeems mutual fund units, nobody knows the price yet. The NAV is worked out at the end of the day, after markets close. So the rule that decides which day's NAV applies has to rest on something fixed: the exact time the request reached an official point of acceptance. That time is the time stamp, and the rule that turns it into a NAV is the cut-off time.
This is the rule set the RTA lives by, and Series II-B tests it from several sides: who may stamp, what gets stamped and where, the cut-off for each scheme type, and which day's NAV a given transaction gets.
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The terms
- Official Point of Acceptance (OPA)
- A place where a transaction counts as received by the fund house or RTA. Mutual fund offices and the designated Investor Service Centres (ISCs) are OPAs, and a fund house may name other locations. For online transactions, the server at the AMC or RTA end is the OPA.
- Time stamp
- An impression from a time stamping machine that records the location code, machine identifier, date, time (hh:mm) and a running serial number. SEBI makes electronic time stamping mandatory for mutual fund financial transactions.
- Cut-off time
- The time set by SEBI, per scheme type and transaction, that decides whether a request gets today's NAV or a later one.
- Applicable NAV
- The NAV at which a transaction is processed. It depends on the day, the time, the scheme type and, for purchases, when the money is available for the fund to use.
Time stamping: the rules
- check_circlePurchase: stamp the face of the application form and the back of the cheque. Both must carry the same serial number, so they must arrive together.
- check_circlePurchase by electronic fund transfer: stamp the fax copy of the form and of the transfer instruction. Online transactions are stamped by server time.
- check_circleRedemption, switch or transfer (no payment instrument): stamp the request and the investor's acknowledgement copy. If no acknowledgement is issued, stamp the request twice.
- check_circleNon-financial transaction: all impressions go on the request itself.
- check_circleA distributor's office is not an OPA and cannot stamp. Forms a distributor brings in a bunch are stamped one by one at the ISC, and each gets the NAV for its own stamp, whatever time the bunch arrived.
- check_circleIncomplete form: do not stamp it. Return it over the counter for correction. Once a form is stamped, it is not returned, even if it turns out to be unacceptable.
- check_circleStamp on blank space only, never over anything written, and make it legible: it decides the NAV.
- check_circleNFO applications need no time stamp. The NFO price is the same for everyone in the offer period, which is why collecting bank branches can accept them.
Exceptions and special cases
- check_circleLiquid funds publish a NAV for every calendar day, because their NAV moves only by interest accrual. That is why a liquid fund purchase can get a Sunday or holiday NAV.
- check_circleFunds must be available without using any credit facility, intra-day or otherwise, for a liquid fund purchase to qualify.
- check_circleInstant Access Facility (IAF), allowed only in overnight and liquid schemes: a redemption before cut-off gets the lower of the previous calendar day's NAV and the NAV of the day received. After cut-off, the lower of the day received and the next calendar day.
- check_circleThe cut-off rules do not apply to NFOs, international schemes, or units bought and sold on a recognised stock exchange.
Worked examples from the workbook
Take a week where Monday, Wednesday, Thursday and Friday are business days, and Tuesday, Saturday and Sunday are not.
- 1
Equity fund purchase of ₹3,00,000, applied Monday
The money is realised on Wednesday by 2 pm. The investor gets Wednesday's NAV. For purchases, the day the funds are available decides, not the day of the form.
- 2
Liquid fund purchase, applied Monday
Funds realised by 1 pm Monday (before the 1.30 pm cut-off): Sunday's NAV, the day before receipt. Realised by 3 pm Monday (after cut-off): Tuesday's NAV, the day before the next business day, Wednesday. Realised by 10 am Wednesday: Tuesday's NAV, the day before the funds were available.
- 3
Equity fund redemption, applied Monday
Before 3 pm: Monday's NAV. After 3 pm: Wednesday's NAV, because Tuesday is not a business day.
- 4
Liquid fund redemption, applied Monday
Before 3 pm: Tuesday's NAV, the day before the next business day. After 3 pm: Wednesday's NAV.
Controls on the machine
The workbook's maintenance rules for time stamping machines at the ISC.
- check_circleTest every machine every day as per a laid-down process.
- check_circleKeep it locked except to change the ribbon or ink cartridge. The ISC head holds the key.
- check_circleKeep a machine log at branch level of every time it is opened, including cartridge changes and breakdowns.
- check_circleEach morning, check that the first serial number follows on from the previous day's last.
- check_circleEvery OPA produces a daily control report with the first and last serial numbers and the serial number at cut-off time.
The traps in the paper
Three mistakes cost the most marks. Using 3.00 pm for a liquid fund purchase (it is 1.30 pm). Giving a non-liquid fund purchase the NAV of the day the form arrived (it is the day the funds are available). And letting a distributor's office stamp a form (it is not an OPA). These figures come from SEBI circulars and can change, so learn them from the current workbook.
FAQs
What is the cut-off time for mutual fund purchases?expand_more
3.00 pm for equity and debt funds other than liquid funds, and 1.30 pm for liquid funds. For non-liquid purchases the NAV is that of the day the money is available to the fund.
What is the cut-off time for mutual fund redemptions?expand_more
3.00 pm for all scheme types, liquid funds included. What differs is the NAV: a liquid fund redemption before cut-off gets the NAV of the day before the next business day.
Who can time stamp a mutual fund application?expand_more
Only an official point of acceptance: the mutual fund's offices, the designated Investor Service Centres and any other location the fund house names. Online transactions are stamped by the AMC or RTA server.
Why do NFO applications not need a time stamp?expand_more
Everyone in an NFO buys at the same offer price, so the time of receipt does not change the price. That is why collecting bank branches can accept NFO forms.
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