A novel step towards progress, Securities and Exchange Board of India (SEBI) has decided on to put nil restrictions over redemption up to Rs. 2 lakhs. Investors can quickly redeem the amount and also if, above the limited amount, it will be treated in a relaxed way. The issues were circulated by the respective department of capital market regulators. For those, who have exceeded amount i.e. more than 2 lakhs INR then the said limited money will be only counted under SEBI’s terms and conditions.
The Asset Management Companies are subjected to curb the extra amount exceeding Rs. 2 lakhs. They are allowed to impose restriction whenmarket at large becomes illiquid affecting almost all securities rather than any issue the particular security. The extraordinary measures were taken after its investment turned to debts along with securities worsened.
In the similar case of redemption, JP Morgan limited to 1% on two mortgage schemes. Also, Kotak Mahindra’s Chief Investment Officer of Debt Lakshmi Iyer stated that “This is hugely investor-friendly. Since most of the retail investments are below or around Rs.2 lakh, Sebi’s approach is in the right direction,”
In total, there are 44 Asset Management Companies in India out of it top three being HDFC MF, Reliance MF and ICICI Bank MF. Last year, the respective department received around 16,425 complaints from the investors. The funds generated by the conglomerates closed at Rs. 14,21,952 crores this fiscal year. Also, FY 2015-16 recorded a slowdown by 7% in complaints in comparison to previous year.
Restrictions on redemption may be imposed for a specified period not exceeding 10 working days in any 90-day period.Redemption due to the illiquidity of a particular security in the portfolio of a scheme due to a poor investment decision will not be allowed. It can also be restricted in case of market failures, closure of exchanges, or regular course of transactions. The events may differ very from one to another likewisepolitical, economic, military, monetary or another emergency.
According to SEBI, Any imposition of restriction would require specific approval of the board of the AMCs and trustees and the same should be conveyed to Sebi immediately. The circular is applicable immediately for all schemes to be launched after Tuesday and all the existing schemes with effect from July 1, 2016.
The inflow of equity was adjudged to 4,438 crores INR in April merely reversal to the output/outflows was registered to Rs. 1,370 crores when investors pulled off the huge amount of money in as much as 23 month gap. Experts maintain opinions that forthcoming sale could witness aggressive bidding as per the growing interest rate of 8% per annum.