Bought On The Dip And Didn’t Get June 4 Price For Mutual Funds — Here’s What Went Wrong
There may have been a delay in the transfer of funds by the bank and in the sending of confirmation of the transaction by the payment aggregator.
Indian equity markets have been on a rollercoaster ride this week, gyrating between heady highs and precipitous falls. Domestic investors have been strong buyers throughout, but several mutual fund investors have taken to social media to complain that they placed orders before the deadline on June 4—the day the equity markets crashed—but only got units allotted at the net asset value of the next day.
This has led to a significant notional loss for these investors. That’s because equity markets rebounded sharply on Wednesday, with the benchmark Nifty 50 recouping 3.4% after falling nearly 6% on Tuesday.
Theories abound about what went wrong. In one, a glitch at BSE StAR MF, the online order collection system for mutual funds by the BSE, was held responsible. But the BSE issued a clarification on Friday, saying it was a technical glitch. "Prima facie, there was a lag in receiving details of credit or payments from payments aggregator(s)/bank(s) for a few customers, which led to the delayed NAV," it said.
The most probable cause of the disruption was a delay in the processing of transactions because some banks and payment aggregators were unable to handle the flood of orders, said the chief operating officer of a domestic investment platform.
According to the current norms, for investments in equity mutual fund schemes, units are allotted to investors at the same-day NAV, as long as the mutual fund receives the money before the cut-off time. This cut-off time is 2 p.m.
Here’s How It Ordinarily Works
When an investor places a 'buy' request on an application, the bank is notified and the investor’s bank account gets debited. This is not real-time. The bank transfers the funds to a payment aggregator, which subsequently transfers funds to the mutual fund’s account. The payment aggregator makes these settlements at periodic intervals.
On Tuesday, volume shot through the roof. There may have been a delay in the transfer of funds by the bank and in the sending of confirmation of the transaction by the payment aggregator, according to the COO quoted above, who spoke on the condition of anonymity.
The issue was also addressed at the press conference to address the rate decision of the Monetary Policy Committee of the Reserve Bank of India on Friday.
The central bank has been working towards reducing downtime in the UPI channel for the last few years, RBI Deputy Governor T. Rabi Sankar said in response to a reporter's question about mutual fund investors not being able to make payments through the Unified Payment Interface.
Ultimately, the market regulator and the banking regulator will likely have to step in to resolve investor grievances, with all parties currently refusing to accept responsibility.
For now, investors looking for redressal can log on to the SEBI Complaint Redressal System website at https://scores.sebi.gov.in/ and make a complaint.
