Sebi raises cash transaction limit in MFs to Rs 50,000

Expected to boost financial inclusion

To expand the reach of mutual funds in hinterland, market regulator Securities and Exchange Board of India (Sebi) on Thursday increased the cash transactions limit in such funds to Rs 50,000 from Rs 20,000.

The Sebi, in September 2012, had allowed fund houses to accept up to Rs 20,000 in cash per investor, per mutual fund in a financial year.

"It has been decided to increase the limit of cash transactions in mutual funds from the existing limit of Rs 20,000 per investor, per mutual fund, per financial year to Rs 50,000," Sebi said in a circular issued on Thursday.

The new limit is subject to compliance with the Prevention of 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 schemes having features similar to that offered by Money Market Mutual Fund schemes. 

Retail investors

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".