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

SEBI's New Fund Offer (NFO) 30-day deployment rule — complete guide for investors:

1. Step 1: What is the NFO 30-day deployment rule? (a) SEBI (the Securities and Exchange Board of India) introduced a rule requiring mutual funds to deploy the NFO proceeds within 30 days of the NFO closure — this rule was introduced to protect investors from fund houses that collect money through NFOs and then sit on the cash for months — earning management fees without actually investing, (b) the rule applies to all open-ended NFOs (equity, debt, hybrid — but not to ETFs — which are listed on the exchange — and not to closed-ended funds — which have a fixed maturity), © the rationale: (i) when an investor invests in an NFO — the investor expects the money to be invested in the market — not kept in cash — (ii) if the fund house keeps the money in cash — the investor does not get the market returns — but still pays the management fee — which is a mis-selling, (d) the deployment requirement: the fund house must deploy at least 70% of the NFO proceeds (in the scheme's stated asset allocation — within 30 days of the NFO closure — and disclose the deployment status on the website — and in the fact sheet).
2. Step 2: How the rule works. (a) the NFO period: typically 3-5 days (during which investors can subscribe — at the face value of Rs 10 — per unit), (b) the NFO closure: the last day of the NFO (after which no new subscriptions are accepted — at the face value), © the 30-day period: starts from the day after the NFO closure (the fund house has 30 calendar days — to deploy the proceeds — in the scheme's stated asset allocation), (d) the deployment: (i) for equity schemes: at least 70% in equity and equity-related instruments, (ii) for debt schemes: at least 70% in debt and money market instruments, (iii) for hybrid schemes: as per the stated asset allocation, (e) the disclosure: the fund house must disclose: (i) the total NFO collection, (ii) the amount deployed — as on the 30th day, (iii) the amount pending — and the reasons for non-deployment, (f) if the fund house fails to deploy: SEBI can take action (warning — or penalty — or restriction on future NFOs).
3. Step 3: Common issues for investors. (a) fund house does not deploy within 30 days (the fund house cites “market conditions” — or “unfavourable valuations” — and keeps the money in cash — for months — beyond the 30-day limit), (b) the NAV does not move (the investor's money is in cash — and the NAV does not move — even when the market is rising — the investor loses the opportunity), © the management fee is charged (the fund house charges the management fee — on the total AUM — including the undeployed cash — which is unfair — as the investor is not getting the market returns), (d) the disclosure is not made (the fund house does not disclose the deployment status — on the website — or in the fact sheet — and the investor does not know whether the money is deployed), (e) the scheme is different from the stated allocation (the fund house deploys in a different asset class — e.g., a “technology fund” investing in non-technology stocks — or a “debt fund” investing in equity — which is a mis-selling).
4. Step 4: How to check deployment status. (a) check the fund house website (the fact sheet — which is published monthly — and shows the asset allocation — and the cash position), (b) check the SEBI website (for any action against the fund house — for non-deployment), © check the AMFI website (amfiindia.com — for the scheme details — and the NAV history), (d) compare the NAV (with the benchmark — if the NAV is not moving — while the benchmark is rising — the money may be in cash), (e) file RTI with SEBI (asking for: (i) the deployment status of [scheme name] — NFO closed on [date] — the amount collected — the amount deployed — and the amount pending, (ii) the action taken by SEBI — against the fund house — for non-deployment, (iii) the total NFO collections — and deployment — for all NFOs — from [date] to [date]).
5. Step 5: File a complaint with SEBI. (a) file a complaint on SCORES (SEBI's online complaint portal — scores.gov.in — with the scheme details — and the issue — e.g., “the fund house did not deploy the NFO proceeds within 30 days — the NAV is not moving — and the management fee is being charged on undeployed cash”), (b) SEBI will investigate (and take action — if the fund house violated the deployment rule — warning — or penalty — or restriction on future NFOs), © the fund house must respond (to SEBI — within the specified timeline — with the reasons for non-deployment — and the deployment plan), (d) if SEBI does not act: file a writ petition (in the Bombay High Court — or SAT — the Securities Appellate Tribunal — against SEBI's inaction).
6. Step 6: Investor remedies. (a) exit the scheme (if the fund house is not deploying — and the NAV is not moving — exit the scheme — and invest in an existing scheme — with a track record), (b) demand a refund (of the management fee — charged on the undeployed cash — from the fund house — and from SEBI), © file a consumer complaint (for deficiency of service — and mis-selling — in the consumer court — for refund of the fee — and compensation), (d) file a class action (with other investors — who invested in the same NFO — for collective redressal), (e) Example: An investor invested Rs 1 lakh in an NFO — the fund house did not deploy within 30 days — the NAV did not move — while the benchmark rose 10% — the investor lost Rs 10,000 — the investor filed a complaint on SCORES — SEBI investigated — and found that the fund house violated the deployment rule — SEBI imposed a penalty of Rs 5 lakh on the fund house — and directed the fund house to refund the management fee — on the undeployed cash — to all investors.

See SEBI NFO Rule and Find PIO.