SEBI NFO Rule: AMCs Must Invest Your Money in 30 Days

Say you put Rs 1 lakh into a shiny new fund offer because the theme sounded good. Weeks pass. You check the factsheet and a big slice of your money is still sitting in cash, not invested in the stocks or bonds the scheme promised. You start to wonder whether the fund house is just holding your money and earning on it while doing nothing.

Direct answer: Under the SEBI circular dated 27 February 2025 (SEBI/HO/IMD/IMD-PoD-1/P/CIR/2025/23), an Asset Management Company must deploy the money collected in a New Fund Offer as per the scheme's stated asset allocation within 30 business days from the date of allotment of units. Only one extension of another 30 business days is allowed, and only if the Investment Committee approves it with reasons recorded in writing.

This is one of SEBI's strongest pro-investor moves on mutual funds in recent years. It stops fund houses from launching a scheme, collecting your money, and then sitting on idle cash.

If the fund house does not deploy your NFO money within the timeline, the rule protects you in clear ways:

• Free exit option. The AMC must give you the option to exit the scheme. You can take your money out instead of staying stuck.
• No exit load. When you exit because of this failure, the AMC cannot charge you an exit load. Your redemption is not penalised for the fund house's delay.
• Curbs on the AMC. Until the money is deployed, the AMC faces restrictions on accepting fresh inflows and new subscriptions into that scheme. The fund house cannot keep taking new money while old money sits idle.

In short, the cost of missing the deadline falls on the AMC, not on you. The free exit window is your escape route, and the inflow freeze is the pressure that pushes the AMC to actually invest.

1. Allotment day (Day 0). Units are allotted to you after the NFO closes. The clock starts here, not on the day you applied.
2. Within 30 business days. The AMC must invest the corpus as per the scheme's stated asset allocation. Business days exclude weekends and market holidays, so this is longer than 30 calendar days.
3. One extension of 30 more business days. Allowed only if the AMC cannot deploy in time, places written reasons before the Investment Committee, and the Committee approves after examining the cause for delay.
4. If still not deployed. You get the exit option with no exit load, and the AMC faces restrictions on fresh inflows into the scheme until the money is deployed.

The Investment Committee should not ordinarily grant an extension where the assets the scheme needs are liquid and easily available in the market.

You do not have to take the fund house's word. You can verify deployment yourself:

1. Read the monthly factsheet. Every AMC publishes a scheme factsheet each month. Look at the portfolio breakup and the cash or cash-equivalents percentage. A high cash holding well after allotment is a red flag.
2. Check the monthly portfolio disclosure. SEBI requires AMCs to disclose the full scheme portfolio every month on their website and on the AMFI website. Match the holdings against the asset allocation promised in the Scheme Information Document.
3. Compare against the scheme document timeline. The scheme document states the indicative timeline for deploying funds. If the disclosed portfolio still shows large idle cash beyond 30 business days, the AMC may be in breach.
4. Note your allotment date. Your account statement and the consolidated account statement show the date units were allotted. Count 30 business days from there to know your deadline.
5. Ask the AMC in writing. If deployment looks delayed, email the AMC and ask for the deployment status and whether the Investment Committee granted an extension. Escalate to the AMC's investor grievance cell if you get no clear reply.

For a wider plan on using disclosure and information rights to hold institutions accountable, see The RTI Playbook.

It means business days, not calendar days. The circular says 30 business days from the date of allotment. Business days exclude Saturdays, Sundays, and market holidays, so the real period on the calendar is longer than 30 days.

The clock starts on the date of allotment of units, which is after the NFO closes and units are credited to you. It does not start on the day you submitted your application during the offer period.

No. Only one extension of 30 more business days is allowed, and only with Investment Committee approval and written reasons. The Committee should not grant an extension when the required assets are liquid and readily available in the market.

The free exit option arises when the AMC fails to deploy the funds within the timeline as required by the circular. In that situation the AMC must offer you an exit without charging exit load. It is a protection tied to the AMC's breach, so check the scheme's notices and the portfolio disclosure to confirm the position.

In the AMC's monthly factsheet and monthly portfolio disclosure, published on the AMC website and the AMFI website. Compare the holdings and cash level against the asset allocation stated in the Scheme Information Document.

It applies to schemes launched through a New Fund Offer where the money must be deployed as per the scheme's stated asset allocation. The timeline of 30 business days from allotment, with one possible 30-business-day extension, is the core rule for these schemes.

Before you invest in any NFO, keep this quick checklist:

• Note the allotment date and count 30 business days forward.
• Save a copy of the Scheme Information Document and its asset allocation.
• Set a reminder to read the next monthly factsheet and check the cash level.
• If deployment looks delayed, email the AMC and ask for the status in writing.
• If the deadline passes with no deployment, ask about the exit-without-load option.

Next, protect the rest of your mutual fund and demat holdings with these guides:

• SEBI nomination rules 2025: up to 10 nominees for demat and mutual funds
• SEBI MITRA: trace your inactive and unclaimed mutual funds
• SEBI finfluencer rules: how to check a registered advisor in India