Mutual Fund Finance Essay

1082 Words5 Pages
RBI’s Major Policy Guidelines 1. Every mutual fund shall be constituted as a Trust under the Indian Trust Act and the sponsoring bank should appoint a Board of Trustees. The Board of Trustees should have at least two outside trustees. The overall superintendence, direction, control and management of the affairs and business of the funds should vest in the Board of Trustees. 2. Mutual funds should have a full time Executive Trustee. 3. There must be a “terms length” relationship between the sponsor bank and the Board of Trustees. 4. The sponsor bank‟s contribution to the corpus of the fund should be a minimum of Rs. 25 lakh or such higher amount as may be specified by the RBI. 5. Mutual funds cannot undertake direct or indirect lending, underwriting,…show more content…
Bank sponsored mutual funds cannot invest in finance companies. 7. The investment objectives and policies of the mutual fund should be laid down in the trust deed and every scheme to be launched by the fund must be in accordance with such broad objectives and policies. 8. The subscription amounts collected by mutual funds are primarily intended to be channelized into the capital market instruments like government and other trustee securities, shares/debentures of public limited companies, bonds of public sector undertakings, etc. 9. The total amount invested by a fund from any of its schemes in the shares, debentures, etc., of any specific industry should not exceed 15 percent of a scheme‟s fund. 10. The total cost of managing any scheme under a fund including management fees and other administrative costs should be kept within 5 percent of the total income of the…show more content…
Each scheme floated by a mutual fund shall have prior registration with SEBI. 12. Mutual funds can start and operate both close-ended and open-ended schemes. 13. For each close-ended scheme, the mutual fund shall be required to raise at least Rs. 20 crore and for each open ended scheme at least Rs. 50 crore. 14. Mutual funds cannot keep close-ended schemes open for subscription for more than 45 days. For open-ended schemes, the first 45 days of the subscription period should be considered for determining the target figure or minimum size. 15. Mutual funds shall provide continuous liquidity. Close-ended scheme shall have to be listed on exchanges. For open-ended schemes, mutual funds shall sell and repurchase, units at predetermined prices based on net asset value. 16. Mutual funds are allowed to invest only in transferable securities either in the money market or in the capital market, including any privately-placed debentures or securitized debt. Privately placed debentures, securitized debt and other unquoted debt instruments holdings shall not exceed 10% in case of growth funds, and 40% in case of income funds. 17. Mutual funds shall not be allowed to provide term loans for any purpose. 18. No individual scheme of the mutual fund shall invest more than 5 percent of its corpus in any-one company‟s shares. 19. No mutual fund under all its schemes shall own more than 5 percent of any company‟s paidup capital carrying voting rights. 20. No mutual fund under all
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