How to get same day NAV for MF investments

Effective February 1, 2021, mutual fund investors only get the same day's net asset value (NAV) if their application for purchase of units as well as the payment reaches the mutual fund house's bank account before 3 PM on a business day for all equity and debt schemes. If the payment reaches the mutual fund's account after 3 PM, then the individual (investor) will get units valued at the next day's NAV.At times it can be very important for investors to get the units allotted on the same day as the payment is made i.e., get the same day's NAV. For example, those investing in ELSS schemes on the last day of the tax-saving season, i.e., on March 31. Also, those investors investing in a mutual fund scheme with plans of getting indexation benefit for long term capital gains tax or those investors wanting to invest in a debt MF the day before the NAV goes up due to expectation of a cut in policy interest rates by the Reserve Bank of India (RBI).There are various ways such as cheque, Net-banking, IMPS, RTGS, UPI etc. by which an individual can invest in a mutual fund. Though each option comes with its own set of pros and cons, however, it appears that IMPS, UPI and RTGS are better options for transferring money to the mutual fund's bank account. This is because they are faster in crediting money to the mutual fund's bank account as compared to other methods. Although you can get the same day's NAV by investing before 3 PM, you might not always be able to do this despite making the payment before 3 PM. This is because there can be instances where money has been debited from your bank account but the inefficiency of your bank's server, server glitches or glitches in online banking etc. can delay the credit of funds in the mutual fund's bank account.Remember on April 1, 2021, many customers faced glitches in transfer of money via NEFT, RTGS, IMPS and UPI etc. As per National Payments Corporation of India (NPCI), the financial year closing had led to some UPI and IMPS transactions failure at few banks. Due to this failure, money was not credited into the beneficiary's bank account immediately which is not normally supposed to happen on these money transferring platforms.Here are the pros and cons of five commonly used payment methods.Investment via chequeIf payment for units of a mutual fund is made via a cheque, then it usually takes two to three days for the bank to clear the cheque and transfer the money to the mutual fund's bank account. Once the money reaches the fund house's bank account, only then is the investment done and units are allotted to an investor based on the NAV prevailing on the day money has reached mutual fund's bank account. So, if you are investing in a mutual fund via cheque be prepared to get the allotment date and the corresponding NAV of a few days after deposit of application and cheque with fund house/registrar.Investment via RTGS/NEFTIn case of RTGS/NEFT, the money is transferred usually within 30 minutes to one hour to the mutual fund's bank account. However, in case an individual has not earlier added the mutual fund's bank account as a beneficiary in their Net banking account, then the time taken to transfer the money will be more. When a beneficiary's details are added for the first time, banks usually take 30 mins to 1 hour before allowing the transfer of funds for the first time. Further, some banks put in restrictions on the maximum amount that can be transferred for the first time to the newly added beneficiary account.Milind Nesarikar, Chief Risk, Service Delivery and Operations Excellence Officer, Nippon India Mutual Fund says, "Investors investing in Nippon India mutual funds including ELSS schemes should transfer funds via NEFT before 1 PM or via RTGS before 2:30 PM to get the same day NAV."Though there is no limit on the minimum or maximum amount that can be transferred via NEFT, banks may put a limit on the maximum amount that can be transferred per transaction or per day. For instance, as per State Bank of India website, RTGS can be done for a minimum of Rs 2 lakh and a maximum of Rs 10 lakh. Similarly, NEFT can be done for a maximum of Rs 10 lakh. In case of RTGS transfer, the minimum transfer amount starts from Rs 2 lakh onwards. So do check these details with the bank before you choose your payment method.Investment via UPI/IMPSInvestment in mutual fund schemes can also be done via UPI and IMPS. However, do keep in mind that the maximum that can be transferred via IMPS is Rs 2 lakh per transaction. On the other hand, UPI permits a maximum transaction of Rs 1 lakh per account per day.Nesarikar says, "In case of UPI/IMPS, the money transfers can be done till 2.45 PM for Nippon India mutual fund schemes. This is because they provide instantaneous transfer of money from the investor's bank account to the scheme's mutual fund bank account." Debit cards/Credit cardsNesarikar says, "Investments via credit cards are not allowed in the mutual funds. Investments via debit cards were earlier allowed, however, they offer T+1 settlement. This would mean that NAV of the next day will be allotted to the invested. Further, mutual funds have discontinued the option of investing via debit cards as it is the mutual fund house's responsibility to ensure that no third-party investments have been made using debit cards. It is difficult to cross-check in case of debit cards whether the investor is actually the debit card holder."Net banking--Tie-ups with banksYou might think that this method would always mean an instantaneous transfer of funds, but this is not always the case. Even this depends on the bank's efficiency and whether the MF has a tie-up with the bank or not.People can use net banking to transfer the payment money to the relevant fund house's bank account. To offer an instantaneous transfer of money to the mutual fund's bank account, some AMCs have tied up with various banks. While making an investment in the mutual fund scheme, an investor can choose from the bank options mentioned on the mutual fund website and then make the payment via Net-banking if they have a bank account with any of these banks. For instance, Nippon Mutual fund has tie-ups with 8 banks such as HDFC Bank, ICICI Bank, Axis Bank etc. What happens if you have a bank account with a bank that does not have a tie-up with the mutual fund house? Ashwin Karmarkar, Partner, Vintage Finvest, a mutual fund distributor says, "In case of transaction with a non-tie up bank, the transfer of funds from the individual's account to the mutual fund's bank account will depend on the efficiency of the individual's bank in handling online transfers. Often, public sector banks clear such money transfers with a one-day delay. Thus, even if money is debited from the customer's account immediately, the money will reach the mutual fund's bank account either after 3 PM or the next day. It will lead to the individual getting next day's NAV."What the new NAV rule statesNAV is the net asset value or market value of the securities held by the scheme and it varies on a day-to-day basis. Before February 1, 2021, individuals making purchase transactions up to Rs 2 lakh were given same day NAV irrespective of whether money had been actually transferred to the mutual fund's bank account or not.The new rule effective from February 1, 2021, is applicable on all purchase transactions including initial investments and additional investments made via lump sum or systematic investment plans (SIP). Further, investments made by switching from one mutual fund scheme to another (including switch transactions via systematic transfer plan) will be allotted NAV based on the time that the invested funds become available in the target scheme.Manish Mehta, National Head - Sales, Digital Business & Marketing, Kotak Mahindra Asset Management Company says, "In case of overnight/liquid schemes, a client gets previous day NAV if the application form and realized proceeds reflect in the AMC bank account by 1.30 PM. In all other schemes, the cut off time is 3 PM. Irrespective of the payment mode being used, clear funds have to be in the AMC bank account before the said cut off time to get the same-day NAV."Liquid mutual fund schemes are usually used by companies to earn one-day returns. Karmarkar explains how this works. Suppose the funds are transferred on Wednesday and reach the mutual fund's bank account before 1:30 PM. In such a scenario, the mutual fund will allot the units based on the previous day's NAV, i.e., Tuesday. Now, let us say on the same day when the money is transferred (i.e., Wednesday), a redemption request has been issued by the investor. In such a case, the units will be redeemed based on Wednesday's NAV, thus, offering the investor one-day return presuming that Wednesday's NAV is higher than Tuesday's.

from Economic Times https://bit.ly/2TiahNl
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