Sebi sets cap for short-term MF deposits

The Securities and Exchange Board of India (Sebi) on Monday asked mutual fund schemes not to park more than 15 per cent of the net assets in short-term deposits of all the banks put together.

In a circular here, the capital market regulator, however, allowed the fund houses to raise deposits to 20 per cent with prior approval of the trustees.

The Sebi guideline is to ensure that the funds collected in a scheme are invested as per the investment objective stated in the offer document, the circular said.

"Presently there are no detailed guidelines on this front, as to how much money they can keep or defining the time limit. The regulation only says that mutual funds can keep their money in bank deposits.These pro-active steps by Sebi are to bring a broad framework in place so that fund houses follow certain standard and healthy practises," said A P Kurian, chairman of the Association of Mutual Funds of India.