PSB mergers may hit mutual fund transactions

Industry players say redemption, incremental buying or SIP transactions of investors of PSBs could be hit if account details are not updated by clients over the next few days

Buying and redemption of units in the Rs 31-trillion mutual fund (MF) industry could be hit due to the mergers between public sector banks (PSBs). The bank account details and/or the Indian financial system code (IFSC) for some PSBs customers has changed or is in the process of changing due to the mergers. This has created a problem for registrar and transfer agents (RTA)—MF intermediaries responsible for record-keeping and enabling transactions such as buying and redeeming.

Industry players say redemption, incremental buying or systematic investment plan (SIP) transactions of investors of PSBs could be hit if account details are not updated by clients over the next few days.

Investors having bank accounts with eight PSBs banks, which include Corporation Bank, Oriental Bank of Commerce, United Bank of India, Andhra Bank, Syndicate Bank, Allahabad Bank, Dena Bank and Vijaya Bank will see changes in their account information.

Senior industry officials said the actual impact of the changes will be known on April 1 when the changes in account and IFSC codes will be made by the banks.

According to the CAMS, India’s biggest RTA, six of the eight banks will change only their IFSCs, while retaining the bank account number of their customers.

While Dena Bank and Vijaya Bank, merged with Bank of Baroda, will see changes in both account number as well as the IFSC.

For investors who will undergo changes only for the IFSC code, CAMS have already started replacing old details with new one.

“As an investor convenience initiative, with the consent of MFs we will replace the old bank name with new bank name and old IFSC with the new IFSC. The change will be implemented across all folios and confirmation will be sent to the registered email address as per investor’s MF records. We don’t foresee any problem in cases where only the IFSC is changing.” said a senior official from the CAMS.

Union Bank of India has already announced that IFSC codes of erstwhile Andhra Bank and those of Corporation Bank branches have been changed. Old IFSCs of branches of both banks will not be valid from April 1 2021.

“For two other two banks where bank account and IFSC codes have been changed, we have asked investors to initiate changes in the bank mandate. If these changes are not made then investors will face difficulty in redemptions and their SIPs,” said senior official from the MF industry.