In a move to curb round tripping of funds, SEBI has issued a circular in which it has clarified that mutual fund schemes cannot park corpus in short term deposits (STDs) of a bank, which has invested in the scheme.
Further, mutual fund schemes cannot accept investment from a bank where it has deployed its corpus in STD. SEBI has asked trustees to ensure compliance with the new regulations.
There have been instances of round tripping in the mutual fund industry. In fact, SEBI had found that a large private bank purchased units of the scheme after the latter had parked money in short term deposits. Following this, the market regulator has asked AMFI members to take corrective actions to ensure compliance with these norms.
