Archive / Investment Adviser (Level 1) / Operational Aspects of Investment Management

nism-series-xa-instant-access-facility-daily-limit-liquid-funds[ INVESTMENT ADVISER (LEVEL 1) ]

What is the daily transaction limit prescribed by SEBI for resident individual investors utilizing the Instant Access Facility (IAF) in liquid mutual fund schemes?

[ A ]Up to Rs. 50,000 or 90% of the latest value of investment in the scheme, whichever is lower, per day per scheme per investor[ CORRECT ]

[ B ]Up to Rs. 10,000 per day per scheme

[ C ]Up to Rs. 2,00,000 per day without any percentage restrictions

[ D ]Up to Rs. 10,00,000 provided the request is submitted before 9:00 AM

Takeaway

SEBI caps the Instant Access Facility for resident individuals in liquid mutual funds at ₹50,000 or 90% of the current value of the investor's holding in that scheme, whichever is LOWER, per day per scheme per investor.

Derivation

IAF lets liquid-fund investors get near-instant redemption proceeds (via IMPS/UPI) rather than waiting for the standard T+1 settlement, which is valuable for parking short-term surplus cash — but AMCs must fund this instant payout from their own liquidity buffer ahead of actual portfolio liquidation, creating a risk that needs bounding. SEBI's dual cap — an absolute rupee ceiling (₹50,000) AND a percentage-of-holding ceiling (90%) — ensures that even a large IAF-eligible holding cannot be instantly redeemed beyond the rupee limit, while also preventing an investor with a small remaining balance from draining nearly all of it instantly; whichever constraint binds first (lower) applies.

Why the others fail

B — Up to Rs. 10,000 per day per scheme

₹10,000 understates the actual statutory ceiling — SEBI's prescribed IAF daily limit is ₹50,000 (or 90% of the holding value, whichever is lower), not a flat ₹10,000 figure.

C — Up to Rs. 2,00,000 per day without any percentage restrictions

₹2,00,000 with no percentage restriction overstates the actual limit and omits the mandatory 90%-of-holding-value constraint that applies alongside the rupee ceiling under SEBI's IAF framework.

D — Up to Rs. 10,00,000 provided the request is submitted before 9:00 AM

₹10,00,000 vastly exceeds the actual statutory ceiling of ₹50,000; there is also no SEBI provision granting a higher limit contingent on submitting the request before a specific morning cutoff time.