Ace the NISM Mutual Fund Distributors ExamDifficulty: BeginnerInfo   5 min read
📌 Chapter 9.9 — Cut-off Time and Time Stamping

Consider a client who manages a small business and uses a liquid fund to park their working capital. They call you on a Tuesday morning, stressed because they have a major supplier payment due on Thursday and need to redeem ten lakh rupees by the current day’s NAV. As an MFD, you know that while liquid funds offer high liquidity, the redemption process isn’t just about clicking a button; it is governed by a strict regulatory framework designed to balance investor access with market stability.

For liquid and overnight funds, the SEBI-mandated cut-off for redemption requests is 3:00 PM. If your client submits their redemption request before this time on a business day, the NAV applied is that of the same day. However, if they hit the submit button at 3:15 PM, the request is treated as received on the following business day, meaning the redemption will be processed at the next day’s NAV.

This distinction is critical because, unlike equity schemes that may experience significant intraday volatility, liquid funds are valued daily, and a one-day delay can impact the interest realization for a corporate treasurer or a business owner managing cash flows.

Beyond just the timing, MFDs must explain that the redemption proceeds are credited based on the scheme’s settlement cycle. Liquid funds are designed for T+1 settlement, which is a major advantage for liquidity management. When you guide a client through this, you are providing value that goes far beyond the transaction itself. By helping them plan their redemptions in advance, you prevent potential cash flow mismatches that could occur if they assume instantaneous liquidity.

While direct plans might appear cheaper on paper, the professional oversight you provide—ensuring that their liquid investments align with their actual cash flow requirements—is why many clients prefer the guidance of a trusted MFD.

Always encourage clients to use digital platforms for these requests, as these systems provide an automated, time-stamped audit trail that removes ambiguity. When you handle the communication and operational planning, you insulate your clients from the anxiety of missing a cut-off. Remember, in the world of debt and liquid funds, the NAV you secure is a product of timing, and your role is to ensure that the client’s financial clock is perfectly synchronized with the fund’s regulatory cycle.

Nuance

⚠️ Nuance
Many MFDs mistakenly believe that the ‘redemption amount’ affects the NAV applicability, similar to how purchase amounts once dictated processing logic. Candidates often confuse the settlement cycle (T+1) with the NAV applicability time (3:00 PM cut-off). A professional must remember that the NAV is strictly a function of the time the request is successfully timestamped at the Official Point of Acceptance, regardless of the size of the redemption.

Check Your Understanding

Practice Question 1

An investor submits a redemption request for units in a Liquid Fund at 3:45 PM on a Wednesday. What NAV will be applied to this transaction, assuming Wednesday is a business day?

Practice Question 2

Which of the following statements is true regarding the redemption of units in a Liquid Fund under current SEBI regulations?

This is a companion read for Section 9.9 — Cut-off Time and Time Stamping from Ace the NISM Mutual Fund Distributors Exam by Akhilesh Gururani, available on Amazon Kindle.

Copyright © 2026 Akhilesh Gururani. All rights reserved.