The Securities and Exchange Board of India vide its notification dated 4th August 2021 has clarified that the mutual funds shall maintain current accounts in “an appropriate number of banks” for receiving subscription money from investors and for payment of redemption/dividend/brokerage/ commission etc.to facilitate financial inclusion, convenience of investors and ease of doing business.
At present, mutual funds are required to maintain current accounts in multiple banks, having a presence beyond the top 30 cities, for receiving subscription amount and for payment of redemption proceeds. The mutual fund industry informed that the Reserve Bank of India (RBI) instructed that banks shall not open current accounts for customers who have availed credit facilities in the form of cash credit or overdraft from the banking system.
On a review, however, the RBI provided an indicative list of accounts stipulated under various statutes and instructions of other regulators that can be opened without such restriction, including accounts for the purpose of New Fund Offerings (NFOs)/dividend payment and share buyback, among others.
The Mutual fund industry has represented that subscription in units of open-ended mutual fund schemes is akin to continuous NFO and redemption of units of mutual fund schemes is akin to buy back or repurchase of shares.
Considering the same, the industry requested Sebi to issue instructions for mutual funds in respect of maintenance of current accounts in multiple banks and the regulator has issued the above clarification.
