labels: sebi
SEBI issues norms for MF investment in short-term bank deposits news
17 April 2007

Mumbai: Mutual funds cannot invest more than 10 per cent of the total net assets of a scheme in short-term deposits of a single bank, market regulator SEBI said. The investment cap would also take into account deposits with the bank''s subsidiaries.

While announcing guidelines for parking funds in short-term deposits of scheduled commercial banks (SCBs) by MFs, the Securities and Exchange Board of India also defined `short-term'' for funds'' investment purposes as a period not exceeding 91 days.

Besides, SEBI has capped the parking of funds in short-term deposits of all SCBs at 15 per cent of the net asset value (NAV) of a scheme, which can be raised to 20 per cent with prior approval of the trustees.

A mutual fund''s investments in short-term deposits of associate and sponsor SCBs together should not exceed 20 per cent of total deployment by the MF in short-term deposits, it added.

The new guidelines would be applicable to all fresh investments in new and existing schemes. In cases of existing schemes, the asset management company has been given three-months'' time to conform with the new guidelines.

SEBI has also asked the trustees of a fund to ensure that no funds are parked by a scheme in short-term deposit of a bank, which has invested in that particular scheme.

These guidelines are aimed at ensuring that funds collected in a scheme are invested as per the investment objective stated in the offer document of an MF scheme, SEBI said.



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SEBI issues norms for MF investment in short-term bank deposits