The Securities and Exchange Board of India has directed all mutual funds to furnish details of their investments in fixed deposits. A ceiling on such investments and their maturity period is also being worked out.
In a circular sent to all fund houses on Thursday, the watchdog has asked for details of investments made by fund houses in fixed deposit instruments, across all schemes, particularly specifying the FD investments exceeding 25 per cent of the total portfolio of a MF.
The funds have been given a week to respond, and many have already provided the details.
Sources said the regulator may also bar funds in default from investing in FDs of more than one month maturity.
While the cap on FD investments has not yet been fixed, sources said that it might be set at 25 per cent of the assets of a scheme.
While the Sebi move is being seen by industry circles as a crackdown on fixed maturity plans, where fund houses take the easy way out and invest almost 100 per cent of the corpus in FDs, the immediate provocation lies in the Global Trust Bank crisis. Some fund houses were found to have invested in the FDs of the bank.
Though the management of the fund houses took immediate steps to ensure liquidity for their clients, Sebi sources said the regulator did not want to take any chance.
At present, Sebi regulations do not prohibit MFs from investing in FDs, but so far as equity schemes are concerned, regulations require that fund houses can park their money in FDs only till such time as the funds cannot be deployed in the equity markets.
Taking advantage of this clause, funds sometimes invest up to 25 per cent of their corpus in normal schemes in FDs, while in the case of FMPs, the ratio may even go up to 100 per cent as they are short-duration plans.
An asset management company promoted by a leading corporate house is known to have invested Rs 2,000-3,000 crore (Rs 20-30 billion) in FDs, which is rolled over from scheme-to-scheme in anticipation of funds flowing into those schemes.
