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Why is my mutual fund purchase order rejected though I have sufficient funds in my trading account?

Although unusual, your mutual fund purchase order can be rejected under few circumstances even though you have sufficient funds in your trading account.

At a very high level, it’s important for you to understand that the order you place has to flow through two channels before it’s fully executed.

Coin - This is the front-end developed by Zerodha, using which you can place an order to buy and sell mutual funds

BSE StARMF - StARMF is a backend order processing engine developed by the Bombay Stock exchange.

When you place an MF order, the order has to flow through both these systems before it is processed.

If your order is rejected, then the rejections are either triggered from Coin or BSE StARMF. The reasons for the rejection are as follows.

Coin Rejections - You can identify coin rejections if you see ‘Purchase not allowed’ error on the screen. Here is the snapshot of how the Coin based rejection looks.

The reasons for Coin rejections are -

1. The fund you intend to purchase is merging with another fund.

2. AMC changes the fund’s investment mode from Demat to Non Demat.

3. You place a transaction for an international fund on a ‘non business day’.

Coin can also display “ Order placing failed - Scheme Info not available from exchange. It could be a purchase blocked fund ”. Here is the snapshot of the error message.

If an order for such a scheme is already available in the Coin database, it will show up on the order history under Pending orders. The status will be “new” till the scheme is allowed for purchase again.

The error message flashes when you try one of the following -

Wound up schemes - Mutual Fund schemes get wound up if they don’t meet a few requirements, or if the AMC decides to wind up the scheme. In such cases, all purchase and sell transactions are disabled in the particular scheme. These schemes do an extinguishment of the units and the payout is credited directly to the client’s bank account.

Regular funds - You could see a Regular plan of mutual funds on Coin if you have transferred them from another broker/AMC, or if you’ve purchased them on Coin before 2017. You can only sell these Regular funds. You will not be able to invest in them through Coin.

Apart from rejections from Coin, BSE StARMF can also reject the order. The rejection from BSE looks like this -

The reasons for rejection from BSE StARMF is as follows -

1. Consolidated amount for same PAN cannot exceed Rs.2500 - This means the fund has restricted purchase of maximum of Rs.2500 per PAN. Hence you cannot buy more than the stipulated amount. This rejection is only in respect to Mirae Asset Emerging Bluechip Fund. Here is the circular.

2. Minimum Amount Condition Failed - AMCs revises the minimum investment that is set for the particular scheme, this error is displayed. For example, if it is increased from Rs.1,000 to Rs. 5,000. If you try to place an order for Rs.1,000 as the minimum investment, it will get rejected with this error.

3. USA and CANADA Investors are not allowed to Invest - NRO clients belonging to the USA and Canada are not allowed to invest in a few mutual fund schemes (as restricted by the AMCs). Additionally, if the KYC address mentioned on the KRA in our records is of the USA or Canada, the orders can be rejected.

4. EKYC client - If the KYC flag as per the CVL KRA website is marked as E-KYC, you will have a maximum investment limit of Rs.50,000 per AMC. More here .

Due to Quarterly Settlement:

There is an instance where your order might be rejected because of the Quarterly Settlement . If you have placed a purchase order post the cut-off time , the order will be placed the next day.

Now, if the Quarterly Settlement is due on the same day (the day that you have placed the order post the cut-off time), then the funds in the trading account will be transferred to your bank account.

Therefore, the order would now not go through since your Zerodha trading account would not have sufficient funds when the Coin system checks for the balance.

Hence, you can make sure to check and maintain the balance before the cut-off time of the Mutual Fund purchase order.

Note that this is also in case you have created an SIP for a fund, and there is a Quarterly Settlement just before the SIP due date.

Note:

  1. If you have sold any shares or have made any intraday profit, this amount will be available to place mutual fund purchase orders only on the next working day (T1) .
  2. If the orders have been rejected by the AMC or by BSE StAR MF, the refund for such orders will take up to a maximum of 10 working days. The refund will be credited to your Zerodha trading account.

For more details, please create a ticket below.