Overnight schemes are now included in the larger-sized category, given the shift by investors — with daily liquidity needs — to such schemes, following the Securities and Exchange Board of India's (Sebi's) restrictions on liquid schemes. Average assets under management (AAUM) of these schemes stood at Rs 52,524 crore in January — a more than 4x jump since the beginning of the current financial year. The AAUM of overnight schemes in April 2019 was Rs 11,566 crore. According to industry players, institutional investors are showing appetite for these funds considering the low-risk and high-liquid nature of the underlying portfolio.
Such schemes can invest in debt papers with maturity as short as one day. Further, these schemes invest in the collateralised borrowing and lending obligation (CBLO) market, which offers a high degree of safety. Last year, Sebi tightened norms for liquid schemes to curb risks in the underlying portfolios of such schemes and prevent volatility in investor flows.
To this end, graded exit loads were introduced in case of investments being redeemed within seven days. In addition, such schemes were directed to hold 20 per cent of corpus in government securities, while restricting exposure to high-yield debt papers.