Mutual fund industry shifts to a T+2 payment cycle for equity funds

In conjunction with the T+1 settlement cycle for equity markets, the mutual fund industry transits to a T+2 payment cycle for equity funds. Continue reading to learn more.

Following the addition of the final group of 256 stocks on Friday this week, the Indian stock market will become the first in the world to have a T+1 settlement cycle for investors. As a result, effective on Friday, shares sold or purchased will be reflected in investors' Demat accounts after one day, resulting in quicker settlement and liquidity for stock market investors. 

It has been decided that all Asset Management Companies (AMCs) would transition to a T+2 redemption payment cycle for equity funds, and execute this consistently with effect from February 1, 2023 (i.e., for all transactions received before cut off time on February 1, 2023, and processed at closing NAV for February 1, 2023) after allowing a few days for the settlement process to stabilise. This is being done to pass on the advantage to mutual fund investors. Previously, the equity mutual fund settlement cycle was T+3. 

According to A Balasubramanian, MD & CEO of Aditya Birla Mutual Fund and Chairman of AMFI, “T+1 settlement cycle for Indian equity markets is a global first. As an industry, we want to pass on the benefit to our mutual fund investors and hence we are proactively adopting a T+2 redemption payment cycle for equity funds.” 

AMFI's Chief Executive Officer, NS Venkatesh, said “AMFI and its member AMCs always keep investor interest at the forefront. 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 and we are happy to announce the shift to the T+2 redemption payment cycle effective February 1, 2023, onwards.”