**Summary:**
This circular, reference number SEBI/HO/IMD/IMD-I/DOF5/P/CIR/2021/610, issued by the Securities and Exchange Board of India (SEBI) on August 4, 2021, addresses the maintenance of current accounts in multiple banks by Mutual Funds (MFs). The circular is directed towards all Mutual Funds (MFs), Asset Management Companies (AMCs), Trustee Companies, Boards of Trustees of Mutual Funds, and the Association of Mutual Funds in India (AMFI).
The circular clarifies that Mutual Funds should maintain current accounts in an appropriate number of banks for the purpose of receiving subscription amounts and for the payment of redemption proceeds, dividends, brokerage, commissions, etc. This measure aims to facilitate financial inclusion, investor convenience, and ease of doing business, given the Reserve Bank of India's (RBI) restrictions on opening current accounts for customers with existing credit facilities. The mutual fund industry 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. SEBI has considered this request to issue instructions for mutual funds in respect of maintenance of current accounts in multiple banks.
This directive is issued under the authority granted by Section 11(1) of the Securities and Exchange Board of India Act, 1992, and Regulation 77 of the SEBI (Mutual Funds) Regulations, 1996, to protect investor interests, promote the development of the securities market, and regulate the securities market.
For further information, contact Divya Kulshrestha, Deputy General Manager, at Tel no.: 022-26449357 or via email at divyam@sebi.gov.in.
Key Entities Referenced
Securities and Exchange Board of India SEBI: Regulatory body for securities market in India that issued the circular.
Mutual Funds MFs: Entities regulated by SEBI, subject to the circular regarding current accounts.
Asset Management Companies AMCs: Companies that manage the assets of Mutual Funds, subject to the circular.
Association of Mutual Funds in India AMFI: Industry association representing mutual funds in India.
Reserve Bank of India RBI: Central bank of India, which issued instructions to banks regarding current accounts.
New Fund Offerings NFOs: Initial offering of units in a new mutual fund scheme.
Securities and Exchange Board of India Act, 1992: The law under which SEBI derives its powers.
SEBI Mutual Funds Regulations, 1996: Regulations governing the operations of mutual funds in India.
CIRCULAR
SEBI/HO/IMD/IMD-I/DOF5/P/CIR/2021/610 August 4, 2021
All Mutual Funds (MFs)/
Asset Management Companies (AMCs)/
Trustee Companies/ Board of Trustees of Mutual Funds/
Association of Mutual Funds in India (AMFI)
Sir / Madam,
Subject: Maintenance of Current Accounts in multiple banks by Mutual Funds
1. Mutual funds currently maintain current accounts in multiple banks including in
banks having presence beyond the top 30 cities (“B-30 cities”), for receiving
subscription amount and for payment of redemption proceeds / dividend /
brokerage/ commission etc. This enables investors to transact with banks of their
choice and facilitates faster transfer of funds.
2. Mutual fund industry has informed that the Reserve Bank of India (“RBI”) has
instructed that banks shall not open current accounts for customers who have
availed credit facilities in the form of cash credit / overdraft from the banking
system. On a review, however, RBI has 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/ share buyback, etc.
3. 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 above,
industry has requested SEBI to issue instructions for mutual funds in respect of
maintenance of current accounts in multiple banks.
Page 1 of 24. Based on the request of mutual fund industry, it is clarified that mutual funds should
maintain current accounts in an appropriate number of banks for the purpose of
receiving subscription amount and for payment of redemption / dividend /
brokerage / commission etc. to facilitate financial inclusion, convenience of
investors and ease of doing business.
5. This circular is issued in exercise of powers conferred under Section 11 (1) of the
Securities and Exchange Board of India Act, 1992, read with the provisions of
regulations 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interest of
investors in securities and to promote the development of, and to regulate the
securities market.
Yours faithfully,
Divya Kulshrestha
Deputy General Manager
Tel no.: 022-26449357
Email: divyam@sebi.gov.in
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