Equity Mutual Fund Schemes To Shift To T+2 Redemption Payment Cycle From Wednesday

Asset management companies are set to move to a shorter redemption payment cycle of T+2 for equity schemes from Wednesday.

At present, funds are transferred to investors' bank account within 3 days after the completion of the redemption process.

Moving to the T+2 cycle for equity schemes will benefit mutual fund investors.

Akhil Chaturvedi, Chief Business Officer of Motilal Oswal AMC, termed the move as a positive step that will give quick and easy liquidity, which can be used to plan re-investment or meet any obligations in a more time-bound manner.

From January 27, Indian equity markets moved to a T+1 settlement cycle for all stocks, shortening the settlement cycle by a day and making the availability of funds a day sooner.

To pass on this benefit to mutual fund investors, Association of Mutual Funds on Friday said that all asset management companies will move to the T+2 redemption payment cycle for equity schemes, and implement this uniformly with effect from February 1, 2023.

Globally, most stock exchanges in developed as well as emerging markets follow the T+2 (trade plus two) settlement system.

Since the day Sebi announced the phased movement of equity markets to the T+1 settlement cycle, the industry has been preparing to shorten the redemption payment cycle, AMFI Chief Executive NS Venkatesh said earlier.