Rbi 's Major Policy Guidelines Essay

Rbi 's Major Policy Guidelines Essay

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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, bills discounting and money market operations.
6. 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 scheme.
6.5.3 Guidelines by SEBI
1. Mutual funds shall be a...

... middle of paper ...

...icts of interest that may arise from transitions by the affiliated persons or companies.
26. Every mutual fund shall have to copy with a common advertising code laid down by the SEBI. The fund is expected to submit to the SEBI the texts of the marketing literature and advertisements issued to the investors.
Mutual funds shall have to disclose in their marketing and publicity brochures for each scheme, the investment objectives, the method and periodicity of valuation of investment, the exact method and periodicity of sales and purchases and other details considered by SEBI to be essential for investors.
27. SEBI can, after due investigation, impose penalties on mutual funds for violating the guidelines as may be necessary. However, for cases of penalties of suspension or deauthorisation of mutual fund entities, prior concurrence of the RBI and the government

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