The Guide to Instant Redemption in Mutual Funds
Traditionally, mutual fund redemptions were processed on the next business day or settled over T+2 or T+3 business days
This changed with the introduction of the Instant Access Facility (IAF), also known as Insta Redemption. This facility was designed to enhance the reach of mutual funds to retail investors by offering the convenience of a bank account with the potential returns of a mutual fund. This facility is available for both Liquid and Overnight Mutual Fund.
How Insta Redemption works
Introduced in 2017, the regulator has laid down specific guidelines ensuring this facility is useful for investors while keeping the funds accessible. The facility is available exclusively to Resident Individual investors with non-demat holdings and must be accessed through an online mechanism (website or app).
The goal of IAF is to credit redemption proceeds to your bank account on the same day of the request. In practice, this often happens within minutes via the IMPS network.
This facility isn't for withdrawing your entire portfolio at once. To manage liquidity, SEBI mandates a strict limit. You can withdraw the lower of:
- ₹50,000, OR
- 90% of the latest value of your investment in the scheme. This limit applies per day, per scheme, per investor.
At What Price can you redeem instantly
- If you withdraw before 7:00 PM: You get the lower of:
Yesterday's NAV (Previous Day)
Today's NAV (Current Day) - If you withdraw after 7:00 PM: You get the lower of:
Today's NAV (Current Day)
Tomorrow's NAV (Next Day)
Which Fund Should You Choose?
Liquid vs. Overnight
While the regulator initially introduced the Insta redemption facility for Liquid Funds, it is now available in Overnight Funds as well. Here is how to decide which one fits your "Instant" liquidity needs.
1. Liquid Funds:
The Classic Choice - Liquid Funds invest in debt securities with a maturity of up to 91 days. While they offer Insta Redemption, Liquid Funds may come with an Exit Load (penalty) if you redeem within 7 days. If you plan to park money for more than a week. If you withdraw instantly on Day 2, you will pay a penalty.
2. Overnight Funds:
The "True" Emergency Fund - Overnight Funds invest in securities maturing in just one day in the low risk category. Most Overnight Funds have no Exit Load. You can invest on Monday and use Insta Redemption on Tuesday to access your funds. The choice may help you for unplanned, immediate liquidity needs (less than 7 days).
Conclusion
The Instant Access facility effectively blurs the line between savings and investments. By understanding the ₹50,000 limit and the NAV rules, you can smartly allocate your emergency cash. For absolute flexibility without exit load worries, Overnight Funds combined with Instant withdrawal offer a combination of low risk and instant access.
Disclaimer - Please note that this article or document has been prepared on the basis of internal data/ publicly available information and other sources believed to be reliable. The information contained in this article or document is for general purposes only and not a complete disclosure of every material fact. It should not be construed as investment advice to any party in any manner. The article does not warrant the completeness or accuracy of the information and disclaims all liabilities, losses and damages arising out of the use of this information. Readers shall be fully liable/responsible for any decision taken on the basis of this article or document.
Mutual Fund investments are subject to market risks, read all scheme related documents carefully
Published on Dec 30th, 2025
