Asset management companies will have to use the corpus from new fund offers within 30 business days, as per a circular issued by the Securities and Exchange Board of India on Thursday.
The AMCs will have to give information about how they plan on fund deployment within their scheme information document, the circular noted.
If the funds are not deployed within 30 business days, then the AMCs must provide written reasons and present them to their investment committees. The committees may grant an extension of another 30 business days, but must review the reasons and ensure steps are taken to prevent future delays, it added.
The directions will come into effect from April 1, 2025.
The circular further mentions that the trustees of mutual funds must monitor fund deployment and ensure compliance with SEBI regulations.
If the AMC fails to comply with these directives, it will not be able to accept new investments in a particular scheme and the investors will be allowed to exit from the scheme without any exit load after 60 days. The companies will also have to mention this exit option to all investors through email or other communication channels, it added.
Fund managers can extend or shorten the NFO period—except for equity-linked savings schemes—based on market conditions, asset availability, and deployment capacity. However, any change must comply with SEBI's Master Circular for Mutual Funds.
Furthermore, if an investor switches from an existing mutual fund scheme to a new NFO within the same AMC, the commission paid to the distributor must be the lower of the two schemes. However, detailed guidelines on this will be put out by the Association of Mutual Funds in India.
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