Mutual funds can have current accounts in ‘appropriate’ numbers of banks

The Securities and Exchange Board of India (Sebi) has allowed mutual funds to maintain current accounts in “an appropriate number of banks” for receiving subscription money from investors and handling redemptions.

The regulator said the move is aimed at facilitating financial inclusion, convenience of investors and ease of doing business.

At present, mutual funds are required to maintain current accounts in multiple banks, having presence beyond the top 30 cities, for receiving subscription amount and for payment of redemption proceeds, said Sebi.

This enables investors to transact with banks of their choice and facilitates faster transfer of funds.

The regulator said the mutual fund industry has informed that the Reserve Bank of India (RBI) has instructed that banks should 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, 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 and dividend payment.