Sebi clarifies on MF investments in short-term bank deposits

New Delhi: Mutual fund houses should ensure that banks — where a scheme has parked funds in the lender's short-term deposits — do not invest in that particular scheme, according to Sebi.

The markets watchdog has issued a clarification regarding 'parking of funds in short-term deposits of scheduled commercial banks by mutual funds — pending deployment'.

"Trustees/ asset management companies (AMCs) shall ensure that no funds of a scheme is parked in STD (short-term deposit) of a bank which has invested in that scheme," Sebi said in a circular on Friday.

Further, it said trustees and AMCs should ensure that the banks in which a scheme has STD do not invest in the same scheme until the scheme has STD with such banks.

As per regulations, a mutual fund may invest funds in short-term deposits of schedule commercial banks, subject to certain conditions.