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nism-series-va-sebi-rebalancing-timeline-passive-breach[ MUTUAL FUND DISTRIBUTORS ]

Under SEBI regulations, in the event of a deviation from the mandated asset allocation mentioned in the Scheme Information Document (SID) due to passive breaches, what is the mandated rebalancing period for mutual fund schemes (other than Index Funds, ETFs, and Overnight Funds)?

[ A ]7 calendar days

[ B ]30 business days[ CORRECT ]

[ C ]90 business days

[ D ]180 calendar days

Takeaway

Option B is correct: 30 business days

Derivation

As mandated by SEBI to ensure uniformity across mutual funds, when an asset allocation deviation occurs due to passive breaches (market movements not originating from AMC action or omission), the AMC must rebalance the portfolio within 30 business days. This rule applies to all schemes other than Index Funds, ETFs, and Overnight Funds. This question tests regulatory compliance timelines governing portfolio integrity. Candidates commonly confuse business days with calendar days or recall incorrect durations.

Why the others fail

A — 7 calendar days

7 calendar days is an incorrect short duration that applies to certain operational settlements, not passive portfolio rebalancing.

C — 90 business days

90 business days is excessively long and contradicts SEBI's standardized 30 business day rebalancing requirement.

D — 180 calendar days

180 calendar days represents an outdated or irrelevant timeframe not recognized in SEBI's passive breach rebalancing circular.