A scheme merger combines two or more mutual fund schemes into one — typically done to consolidate similar schemes after regulatory changes or AMC rationalisation.
Following SEBI's 2017–2018 scheme rationalisation circular, many AMCs merged duplicate or overlapping schemes. For example, an AMC with three 'diversified equity' funds may have merged them into one SEBI-categorised 'Flexi Cap Fund.' In a merger, unit holders of the merging scheme receive units of the surviving scheme at the ratio of their respective NAVs. The surviving scheme's objective, portfolio, and manager may differ from the merging scheme. Investors have the option to exit (redeem without exit load) before the merger takes effect.
When two mutual fund schemes are merged, your units are automatically converted to units of the surviving (larger/surviving) fund at a fair exchange ratio based on their NAVs. You keep the same value — just in a different scheme. Before the merger, you receive a window to exit without exit load. Mergers typically happen to simplify AMC fund ranges or comply with SEBI category rules.
AMC announces merger to investors and SEBI with at least 30 days notice.
Investors have an exit window (no exit load) before merger effective date.
If you don't exit: units are automatically converted at the NAV-based swap ratio.
Tax treatment: merger is not treated as a redemption — no capital gains tax event at the time of merger.
Post-merger holding period and cost continue from original purchase in the merged scheme.