Mutual funds cannot invest more than 10 per cent of the total net assets of a scheme in the short-term deposits of a single bank, the Securities and Exchange Board of India said on Monday.
Announcing guidelines for parking of funds in short-term deposits of scheduled commercial banks (SCBs) by mutual funds, the regulator said that investment cap would also take into account the deposit schemes of the bank's subsidiaries.
The Sebi has also defined 'short term' for funds' investment purposes as a period not exceeding 91 days.
Besides, the parking of funds in short-term deposits of all SCBs has been capped 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.
The parking of funds 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 Sebi said that 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.
The new guidelines would be applicable to all fresh investments whether in a new scheme or an existing one. In cases of an existing scheme, where the scheme has already parked funds in short-term deposits, the asset management company have been given three-months time to conform with the new guidelines.
The 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.
The Sebi guidelines say that asset management companies (AMCs) shall not be permitted to charge any investment and advisory fees for parking of funds in short-term deposits of banks in case of liquid and debt-oriented schemes.
It has also asked the trustees to disclose details of all such funds parked in short-term deposits in half-yearly portfolio statements under a separate heading and has said that AMCs should also certify the same in its bi-monthly compliance test report.
All the short-term deposits by mutual funds should be held in the name of the scheme concerned only, it added.