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Kolkata April 16 SEBI has capped mutual funds' exposure to short-term bank deposits at 15 per cent in order to ensure that the money they have collected are deployed in line with investment objectives.

The regulator, which has referred to clause 8 of Schedule VII of SEBI (Mutual Funds) Regulations, 1996 (pertaining to investment in short-term deposits of scheduled commercial banks, pending deployment), has issued a set of guidelines for parking funds in such deposits.

"Short term" will be treated as a period not exceeding 91 days, SEBI has stated, adding that no fund can put more than 15 per cent of its net assets in deposits of all scheduled commercial banks put together.

This, however, may be increased to 20 per cent, provided the trustees give prior approval. Additionally, parking of funds in short-term deposits of associate and sponsor scheduled commercial banks together will not exceed 20 per cent of the total deployment in short-term deposits.

No fund will park more than 10 per cent of its net assets in short-term deposits with any one scheduled commercial bank (including its subsidiaries). Incidentally, trustees will need to ensure that no money is put in short-term deposits of a bank which has invested in that fund.

For liquid and debt-oriented funds, an asset management company (AMC) will not be able to charge any investment management and advisory fee for parking money in short-term deposits.

The Association of Mutual Funds in India (AMFI), the body representing mutual funds, is of the view that the SEBI move is in the right spirit, aimed at setting certain standards for the AMC to follow. When contacted, Mr A.P. Kurian, Chairman of AMFI, said: "The AMFI board will study the guidelines in detail and examine their significance. We will be in a better position to comment on this in a few days".

SEBI has stipulated that all exposure to short-term deposits will have to be disclosed in half yearly portfolio statements under a separate heading. "Details such as name of the bank, amount of funds parked, percentage of NAV may be disclosed", the regulator has said.

SEBI has made the latest conditions applicable to all fresh investments pertaining to new and existing funds. In case of an existing scheme (where it has already parked funds in short-term deposits), the AMC concerned shall ensure that such a scheme conforms with the above conditions within a period of 3 months, from the date of the issue of the guidelines.

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