The Securities and
Exchange Board of India (Sebi) finalized the graded exit load structure on
liquid funds on Tuesday. Sebi informed the structures of exit loads in a letter
to the Association of Mutual Funds in India (AMFI). The proposal on graded exit
loads was earlier made by Amfi in a letter to Sebi on October 11.
According to the letter that Sebi sent to Amfi, the graded exit load has been
set at 0.0070% on redemption on day 1, 0.0065% on day 2, 0.0060% on day 3,
0.0055% on day 4, 0.0050% on day 5, 0.0045% on day 6 and 0.00% from day 7
onwards. Sebi also said that the load structure will be changed annually based
on the interest rates in the system.
Earlier, Sebi had
mandated liquid funds to introduce an exit load for investors who exit the fund
within seven days. This directive was aimed at minimizing the impact of
frequent inflows and outflows by institutional investors. The movement of big
money used to leave smaller investors vulnerable.
Sebi, in its letter
also asked AMFI to inform the asset management companies about the new rules
pertaining to graded exit load structures. Sebi has also asked the AMCs to
communicate the new structure to their respective investors. The letter also
says that no changes should be made in the exit load structure without
consulting Sebi.
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