NEW DELHI: Mutual fund houses should ensure that banks -- where a scheme has parked funds in the lender's short-term deposits -- do not invest in that particular scheme, according to Sebi.
The markets watchdog has issued a clarification regarding 'parking of funds in short-term deposits of scheduled commercial banks by mutual funds -- pending deployment'.
"Trustees/ asset management companies (AMCs) shall ensure that no funds of a scheme is parked in STD (short-term deposit) of a bank which has invested in that scheme," Sebi said in a circular on Friday.
Further, it said trustees and AMCs should ensure that the banks in which a scheme has STD do not invest in the same scheme until the scheme has STD with such banks.
As per regulations, a mutual fund may invest funds in short-term deposits of schedule commercial banks, subject to certain conditions.