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Synopsis: On June 4, a technical glitch on Zerodha and Groww resulted in investors receiving the NAV for June 5 instead of June 4, causing financial losses due to a market rebound. The issue was attributed to delays in payment reporting from the UPI channel to the Indian Clearing Corporation (ICCL). BSE denied any technical fault on their end. SEBI guidelines emphasize the importance of timely fund transfers to AMCs for accurate NAV allocation.
On June 4, a technical glitch on popular online investment platforms Zerodha and Groww disrupted the mutual fund investments of numerous investors. Despite purchasing their mutual funds before the cut-off time, these investors were allocated the Net Asset Value (NAV) for June 5 instead of June 4. This discrepancy led to significant financial losses as the NAV for June 5 was higher due to a market rebound, contrasting sharply with the 6% drop in the Nifty index on June 4.
Affected investors took to social media to express their frustration, sharing responses from the platforms involved. One user posted an email reply from Groww, which explained that the platform acts solely as an order placement service, with the Bombay Stock Exchange (BSE) managing the actual fund collection and order placement. Groww clarified that delays in payment reporting from the payment aggregator to the Indian Clearing Corporation (ICCL), a BSE subsidiary responsible for clearing and settlement, resulted in the late NAV allocation.
Contrary to some claims, BSE stated there was no technical glitch on their end. The exchange attributed the issue to a lag in receiving payments from the UPI channel for certain customers. This delay caused investors to receive the NAV of the following day, impacting their financial returns.
Investors found themselves in a maze of blame-shifting among brokers, the BSE, and payment aggregators. This incident also highlighted discrepancies between Exchange-Traded Fund (ETF) prices and their NAVs, adding to the confusion.
According to Securities and Exchange Board of India (SEBI) guidelines, the cut-off times for purchasing and switching mutual funds are crucial. For Liquid and Overnight funds, the cut-off is 1 PM, and for Non-Liquid funds, it is 2:45 PM. Meeting these deadlines requires not only completing the transaction but also ensuring the funds reach the Asset Management Company (AMC) within this timeframe.
To avoid such issues, experts recommend buying mutual funds directly from the AMC websites or apps. The CAMS app, for instance, notes that while some major banks provide real-time credit, not all payment aggregators or AMCs are integrated with all banks. Therefore, the credit to the mutual fund account and unit allotment might occur on the next business day if there are delays.
Investors are advised to use the same bank account linked to their mutual fund folio. Using a different account can lead to transaction suspensions, often requiring offline rectification and complicating the process. Utilizing UPI IDs from the same bank or BHIM IDs, rather than aggregator IDs like GPay, PhonePe, and Paytm, can also minimize the risk of such issues in the future.
The incident on June 4 underscores the need for seamless coordination among all parties involved in mutual fund transactions to prevent future mishaps.
Related Questions
1. What caused the mutual fund investment disruption on June 4?
A technical glitch on popular online investment platforms Zerodha and Groww led to the disruption. Despite purchasing their mutual funds before the cut-off time, investors were allocated the NAV for June 5 instead of June 4.
2. How did Groww respond to the issue?
Groww explained that it acts solely as an order placement service, with the BSE managing fund collection and order placement. Delays in payment reporting from the payment aggregator to the ICCL caused the late NAV allocation.
3. What was BSE's stance on the issue?
BSE stated there was no technical glitch on their end, attributing the issue to a lag in receiving payments from the UPI channel for certain customers, which caused the NAV allocation for the following day.
4. What are SEBI guidelines regarding the cut-off times for mutual funds?
According to SEBI guidelines, the cut-off times are 1 PM for Liquid and Overnight funds and 2:45 PM for Non-Liquid funds. Transactions must be completed, and funds must reach the AMC within this timeframe.
5. What recommendations did experts provide to avoid such issues in the future?
Experts recommend buying mutual funds directly from AMC websites or apps. Using the same bank account linked to the mutual fund folio and UPI IDs from the same bank can also minimize risks of such issues.
