As the stock markets continue to trade in high volatility, Securities Exchange Board of India (Sebi) has given an alternative investment option to the domestic retail investors by increasing the cash transaction limit in mutual funds. Sebi through its circular issued on Thursday, increased the cash transactions limit in funds to Rs50,000 from Rs20,000 per mutual fund, per financial year.
Sebi in its circular stated, “It has been decided to increase the limit of cash transactions in mutual funds from the existing limit of Rs20,000 per investor, per mutual fund, per financial year to Rs50,000.”
It further added that the new limit is subject to compliance with the Prevention of Money laundering Act, 2002 (PMlA). Along-with Money Market Mutual Fund (MMMF) schemes, Sebi said that transaction in liquid schemes would be exempted from being reported by employees of Asset Management Companies (AMCs) and Trustees of Mutual Funds to compliance officer within seven calendar days from the date of transaction.
According to Sebi, liquid schemes have emerged as a distinct category of mutual fund scheme having features similar to that offered by Money Market Mutual Fund schemes.
Asset management companies have welcomed the move, saying it would help achieve the financial inclusion target and encourage retail investors to channelise household savings into long-term financial products like mutual funds.
Industry body AMFI (Association of Mutual Funds in India) Chairman and chief of leading fund house Reliance Mutual Fund, Sundeep Sikka, said it was a “welcome move aimed towards better financial inclusion by enabling larger set of audience to participate”.