Cut-off time
Also written Cut-off timing · Cut off timing · Applicable NAV cut-off
The SEBI-prescribed clock time that, read together with the time stamp on the request, decides which day's NAV a mutual fund transaction is priced at.
In plain language
When an investor hands in a purchase or redemption at an official point of acceptance during the day, nobody yet knows the price. The NAV is computed after the markets close.
The cut-off time is how the industry resolves that, fairly and identically for everyone. A machine stamps the moment the request arrived; SEBI's table then says which day's closing NAV that moment earns. It removes discretion completely — which is the point, because without it an investor who saw the market fall at 3.30 pm could still buy at the morning's price.
For the registrar it is the single most consequential field on a transaction, and the reason the time stamping machine is locked and its serial numbers reconciled every morning.
How it works
The applicable NAV depends on four things: the day of the transaction, the time of the transaction, the type of scheme, and the availability of clear funds for utilisation by the mutual fund.
| Scheme | Transaction | Cut-off | Applicable NAV |
|---|---|---|---|
| Equity and debt (except liquid) | Purchases and switch-ins | 3.00 pm | Irrespective of receipt time, closing NAV of the day funds are available for utilisation |
| Liquid funds | Purchases and switch-ins | 1.30 pm | Up to cut-off with funds available before cut-off: closing NAV of the day immediately preceding receipt |
| Equity and debt (other than liquid) | Redemptions and switch-outs | 3.00 pm | Up to cut-off: same day's closing NAV. After: next business day |
| Liquid funds | Redemptions and switch-outs | 3.00 pm | Up to cut-off: closing NAV of the day immediately preceding the next business day |
| Overnight funds | Repurchase and redemption | 3.00 pm, or 7.00 pm if received online | Up to cut-off: closing NAV of day immediately preceding the next business day |
A business day excludes any day on which the money markets are closed or otherwise not accessible. Liquid schemes nevertheless declare a NAV every calendar day.
Cut-off timings do not apply to NFOs, international schemes, or transactions in mutual fund units done on a recognised stock exchange. For electronic transactions the AMC or RTA server is the official point of acceptance, and the time the request reaches that server is what counts.
A worked example
Take a week in which Monday, Wednesday, Thursday and Friday are business days and Sunday, Tuesday and Saturday are not.
Purchase of an equity fund, Rs 3,00,000, applied on Monday. Funds are realised on Wednesday at 2 pm. For equity and debt purchases the receipt time is irrelevant — what matters is when clear funds were available. So Wednesday's NAV applies. At a Wednesday closing NAV of Rs 148.6230:
| Step | Amount |
|---|---|
| Application | Rs 3,00,000.00 |
| Stamp duty at 0.005% | Rs 15.00 |
| Net investable | Rs 2,99,985.00 |
| Units at Rs 148.6230 | 2,018.429 |
Had the bank credited the money on Monday at 2 pm and Monday's NAV been Rs 147.10, the same rupees would have bought 2,039.33 units — about 21 units more. Two days of float, twenty-one units.
Purchase of a liquid fund, applied Monday. Funds realised by 1 pm Monday, before the 1.30 pm cut-off, gets Sunday's NAV. Realised by 3 pm Monday — after the cut-off, same day — gets Tuesday's NAV. Realised at 10 am Wednesday gets Tuesday's NAV again.
Redemption from the equity fund on Monday. Before cut-off: Monday's NAV. After cut-off: not Tuesday, which is not a business day, but Wednesday's NAV.
Why NISM asks about it
Chapter 11 (Operational Concepts of Mutual Funds) devotes section 11.6 and Table 11.1 to this, and the worked week above is the workbook's own illustration. Chapter 6 introduces the cut-off as the reason investors route transactions through an ISC. Questions are almost always of the form "application submitted on day X at time Y, funds realised at time Z — which NAV applies?", plus a standing favourite on why time stamping exists at all. The answer to that one is: to determine the applicable NAV.
Common exam traps
- Liquid fund purchases cut off at 1.30 pm, not 3.00 pm — but liquid fund redemptions cut off at 3.00 pm. Two different clocks in the same scheme.
- For equity and debt purchases the receipt time is not decisive. The closing NAV of the day the funds are available for utilisation applies, whatever time the form arrived.
- "Clear funds" means without availing any credit facility, intra-day or otherwise. An overdraft-funded credit does not count.
- After cut-off means the next business day, not the next calendar day. In the worked week, a Monday post-cut-off equity redemption prices at Wednesday because Tuesday is not a business day.
- NFOs, international schemes and exchange-platform transactions are outside the table entirely.
- A distributor's office is not an official point of acceptance and cannot time stamp. A bunch of forms delivered to an ISC is stamped individually, and each is priced on its own stamp.
- Overnight funds have a 7.00 pm cut-off for online requests — the only extended timing in the table.
Check yourself
1.Ms. Lata Iyer submits a redemption request at a location that the fund house has specified as an Official Point of Acceptance (OPA), which is not an RTA branch. How is her request treated?
- a)It is invalid until forwarded to an Investor Service Centre and re-stamped there
- b)It is treated as received only when it reaches the AMC's head office
- c)It is deemed to have been submitted to the fund house or RTA for processing
- d)It is treated as a non-financial request and processed without reference to NAV
Show the answer
Answer: (c) It is deemed to have been submitted to the fund house or RTA for processing
In addition to the ISC, which are usually managed by an RTA, a fund house may specify other locations as Official Point of Acceptance (OPA). Any transactions received at these locations are deemed to have been submitted to the fund house or RTA for processing.
Deemed submission is the whole point — the timing of receipt at the OPA counts, which matters because as per SEBI guidelines, there is a cut-off time by when the investment has to be made to be eligible for that day's NAV.
Why the others are wrong.
- Options A and B would defeat the purpose of an OPA and could push her request past the cut-off.
- Option D: a redemption is a financial transaction. Non-financial transactions are things like a change in bank details, change in contact details or address, or change in bank mandate, signature update.
What ISCs/OPAs do: among other things, accepting all investor transactions such as purchase, redemption, switch etc. and accepting requests for non-financial transactions.
2.Mr. Deepak Menon invests in several schemes of different fund houses and transacts often. Why does the workbook describe the RTA as useful to such an investor?
- a)Because, with SEBI's cut-off time for that day's NAV, RTAs act as a single window through their Investor Service Centres where transactions relating to various mutual funds are carried out
- b)Because RTAs may accept transactions after the cut-off time at that day's NAV
- c)Because RTAs guarantee the NAV at which his transactions will be processed
- d)Because RTAs are the only channel through which mutual fund transactions can be made
Show the answer
Answer: (a) Because, with SEBI's cut-off time for that day's NAV, RTAs act as a single window through their Investor Service Centres where transactions relating to various mutual funds are carried out
Investors may invest in multiple schemes offered by various fund houses and they further perform transactions (purchases/ redemptions) on a continuous basis. As per SEBI guidelines, there is a cut-off time by when the investment has to be made to be eligible for that day's NAV. So, to make multiple investments, an investor avails the services of RTAs to conduct all his transactions. RTAs act as a single window system to investors where all the work and transaction related to various mutual funds are carried out at the ease of the investor through various Investor Service Centres.
Why the others are wrong.
- Option B turns the cut-off rule upside down. The cut-off is the reason a convenient single window matters; the RTA cannot override it.
- Option C: NAV can move up or down, depending upon whether the value of the portfolio has moved up or down — nobody guarantees it.
- Option D: other channels exist — an OPA specified by the fund house, stock exchange platforms, MF Utility and distributors' portals (Chapter 9).
Note the industry fact: the two leading mutual fund RTAs are CAMS and KFintech, and they provide services to all fund houses — which is what makes a single window possible.
3.Which of these is not a financial transaction processed at an ISC — purchase of units, redemption of units, switch transactions, or change of bank details?
- a)All four are financial transactions
- b)Change of bank details — it is a non-financial transaction, along with contact or address changes and signature updates, while purchase, redemption and switch are financial
- c)Switch transactions, since no money enters or leaves
- d)Redemption, since it takes money out
Show the answer
Answer: (b) Change of bank details — it is a non-financial transaction, along with contact or address changes and signature updates, while purchase, redemption and switch are financial
The chapter draws the line twice.
First in describing why RTAs are needed: every day a large number of transactions, like buying, selling or switching units are done by mutual fund investors. Some of the transactions are financial transactions, while others are non-financial in nature like a change in bank details, change in contact details or address etc.
Buying, selling, switching — financial. Bank, contact, address changes — non-financial.
Second in the ISC's task list: it accepts all investor transactions such as purchase, redemption, switch etc., and separately requests for non-financial transactions such as change in bank mandate, signature update etc.
Two distinct lines in the same list, which is exactly what the question tests.
Option C misunderstands a switch. Units of one scheme are redeemed and units of another purchased; both legs are priced against NAV, so it is unmistakably financial even though no money reaches the investor's bank.
Option D is right that redemption takes money out, but that makes it financial, not non-financial.
Why the classification matters. A financial transaction is priced: as per SEBI guidelines, there is a cut-off time by when the investment has to be made to be eligible for that day's NAV. A change of bank mandate has no NAV consequence at all — it merely updates a record.
Both must be recorded, though. RTAs record and maintain data, both financial and non-financial, either in physical or in electronic form, and the RTA exists to help investors in processing of both financial and non-financial transactions.
Units 14 and 15 of this syllabus are built on the same division — financial transactions in one, non-financial in the other.
Where this is taught
Free preparation for NISM Series II-BRelated terms
- Net Asset ValueThe net assets of a mutual fund scheme divided by the number of units outstanding — what one unit of the scheme is worth on a given day, after every liability except the unitholders' own.
- Instant Access FacilityA facility that credits redemption proceeds to a resident individual investor's bank account on the same day, offered only in overnight and liquid schemes and only through the AMC's own website or app.
- New Fund OfferThe period in which a mutual fund scheme's units are offered to the public for the first time, at a fixed NFO price rather than at NAV, and during which the registrar builds the scheme's first register of investors.
- NIGOA transaction the registrar has flagged as "Not in Good Order" because the application and the money do not reconcile or the paperwork is defective — units are not issued until it is fixed.
- Official Point of AcceptanceA location a mutual fund has formally designated to receive transaction requests, where the application is time-stamped — and that stamp, not the moment the investor handed the form over, decides which NAV applies.
- Transaction slipThe short form an existing investor uses instead of a full application — it carries the folio number, so the registrar can process a purchase, redemption, switch or profile change without re-keying the investor.
- Open-ended fundA mutual fund scheme with no maturity date that keeps selling and redeeming units directly after its NFO, at NAV-linked prices, so its number of units and unit capital change every day.
- NEFTNational Electronic Funds Transfer — a nation-wide system that moves money between bank accounts in batches, round the clock, with no RBI-imposed amount limit; a standard route for mutual fund purchases and pay-outs.
- RTGSReal Time Gross Settlement — electronic transfer in which funds move from one bank to another immediately, used for transactions above Rs 2 lakh with no upper ceiling.
- E-walletsDigital wallets that may be used to buy mutual fund units within a Rs 50,000 umbrella limit shared with cash, and only with money loaded by cash, debit card or net banking — never credit card or cash back.
- Cheque Truncation SystemAn RBI system, started in 2010, in which the physical cheque stops at the presenting bank and an electronic image travels to the drawee bank for payment, cutting clearing time, transit cost and delay.
- On-going offerThe continuous, post-NFO period in which an open-ended scheme sells and redeems units at NAV-linked prices on an ongoing basis — the pricing mechanism the workbook shows keeps every investor's holding fair.
- International assetsShares listed outside India, bonds in other currencies or real estate abroad — investments that carry the asset's own risk plus the effect of exchange-rate movements against the rupee.
- Time stampingThe tamper-proof stamping of every mutual fund application with location code, machine identifier, serial number, date and time at the official point of acceptance — the record that decides which NAV applies.
- Scheme Re-Opening DateThe date after an open-ended scheme's NFO from which investors can buy new units or sell units back to the scheme at NAV-based prices. Close-ended schemes have no re-opening date.
- TriggerA standing instruction that automatically redeems or switches units when a market level, NAV, date or percentage change is reached — a one-time facility that ends once it has fired.
- Indicative NAVThe per-unit NAV of an ETF worked out from the current market value of its portfolio during trading hours, disclosed continuously on the exchanges where its units are listed and traded.