MF Managers To Meet Amfi Over Sebi Deposit Rules

Bangalore: In aspect of the Securities and Exchange Board of India's rules on investments in short-term deposits, mutual fund managers are likely to approach the Association of Mutual Funds in India (Amfi) on April 23, to examine issues such as re-balancing of portfolio and its impact on returns and investors. Fund managers had an informal interaction to discuss Sebi norms on deposits. Further, the Sebi defined short-term deposits as those with tenure of 91 days. Also, Sebi said existing schemes need to comply with this norm within a period of three months. This new norm is seen impacting the fixed maturity plans, which offer indicative yields by locking in investments.
Amidst rising rate scenario, mutual funds floated a slew of quarterly FMPs in March, offering 11-11.75 per cent annualised return. Along with quarterly FMPs, a slew of 13-month FMPs were also floated which offer double indexation benefits to investors, giving them the advantage of indexing investments to inflation for two years while remaining invested for slightly over one year. As per Amfi data, 95 new fixed-term plans garnered Rs 29,232 crore during March.

In case fund managers choose to wind up deposits, it would adversely impact the returns which were offered to investors while floating FMPs. AMFI, said, There would be some impact on returns if deposits (over 91-days) have to be broken. There are a few fund houses such as Tata Mutual, Standard Chartered Mutual, Sundaram BNP Paribas Mutual, DBS Chola Mutual which do not see any problem as they do not have deposits over 91-day tenure in their portfolios. But some representatives of fund houses desired clarity on re-balancing portfolio in case the deposit is over 91 days. The norms are not clear for exiting schemes.