Each of the first three months of the latest financial year also showed a larger value of such transfers taking place than the corresponding months in the previous year. If the trend continues, then the current year would see even larger transfers than FY15. But the regulator is now said to be keeping a close watch.
Securities and Exchange Board of India (Sebi) Chairman U K Sinha warned the sector against flouting norms during such transfers.
"In some instances, we have also found that valuations and inter-scheme transfers are not exactly according to the Sebi requirements…I want you to note…that we are watching. We are aware of what is happening….I want to give you an opportunity…please try and make amends," Sinha said at the Confederation of Indian Industry's annual MF summit.
"The mutual fund business is a business of trust. Even if Rs 700 crore out of the Rs 70,000 crore is done in a suspicious way, then it creates an issue. It is good that the regulator is keeping an eye on these transfers," said Dhirendra Kumar, chief executive officer of fund tracker Value Research.
The largest value on record of such inter-scheme transfers is in FY11, at Rs 3.19 lakh crore. A fund manager with one of the top 10 fund houses said that transfers are mostly done for short-term paper, with a tenure of 15-20 days or less. It could also be to manage transactions where it is felt no interaction with the market is required.
"They don't buy long-duration paper, except perhaps in smaller fund houses which could face problems because market lots are not available in quantities that they want," said the person.