MFs` Short Term Deposits To Be Limited At 15%

Mumbai: The Securities and Exchange Board of India (Sebi) is all set to release a circular asking mutual fund houses not to park more than 15 per cent of their corpus as bank deposits at any point of time. Sebi will define the time-frame of short-term deposits as 90 days. The regulator is also planning to restrict investments by a fund house in its associate bank to 10 per cent of the Net Asset Value (NAV). The 15 per cent limit for short-term deposits, however, could be enhanced to 20 per cent with the approval of trustees. Consequently, fund houses have varying policies on parking their funds in short-term deposits. Some fund houses may park 60 per cent of their corpus for 60 days while others may park only 20 per cent of their corpus in deposits for only seven days. The regulator has held discussions with the Association of Mutual Funds of India (AMFI) and fund managers ahead of announcing these amendments. A reporting system will also be put in place for the purpose of verification by Sebi.