Definition of Exit Load
Exit load is a fee charged by a mutual fund when you redeem (withdraw) your investment before a specified holding period. It is designed to discourage short-term trading in mutual funds and protect long-term investors from the costs associated with frequent redemptions.
Exit loads are typically expressed as a percentage of the NAV at the time of redemption. For most equity mutual funds, the standard exit load is 1% if redeemed within 1 year, and 0% after 1 year. Liquid funds generally have no exit load after 7 days (some have a graded exit load for redemptions within 7 days).
ELSS funds have no exit load (because the 3-year lock-in period already prevents early withdrawal). When planning an SIP portfolio, always check the exit load policy of each fund to avoid unexpected charges if you need to make an early redemption. Exit loads collected from investors are credited back to the fund scheme (not the AMC), protecting remaining investors.