After asking AMFI to work out exit load, the market watchdog SEBI has accepted its recommendations in relation to graded exit for liquid funds that are redeemed within 7 days period from the investment date. The graded exit load has been fixed at at 0.0070% on redemption on day 1 after the investment, 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.
The move is aimed to deter corporates which park money in these funds for very short time period i.e. less than 7 days as this poses threat to retail investos during times of credit related concerns in fixed income asset class.
Nonetheless, AMFI is still to review the structure in respect of exit load to be charged on an annual basis.
For large institutional investors, ocvernight funds will be a better option with no graded exit and money can be parked for as less as 1 day.
This graded exit is now expected to impact insta redemeption which was allowed in case of few funds which extend 90% of the fund value or Rs. 50,000 whichever is lower.