ENERAL MANAGER

INVESTMENT MANAGEMENT DEPARTMENT

SEBI/IMD/CIR No. 9/20306/03

November 12, 2003

All Mutual Funds registered with SEBI Association of Mutual Funds in India (AMFI)

Dear Sirs,

Sub: Investments by Mutual Funds in Short Term Deposits of Scheduled Commercial Banks

According to Clause 8 of Schedule VII of SEBI (Mutual Funds) Regulations, 1996, pending deployment of funds of a scheme in securities in terms of investment objectives of the scheme, a Mutual Fund can invest the funds in short term deposits of scheduled commercial banks.

With a view to further strengthen the investment norms and enhance transparency in investments by Mutual Funds, the matter was discussed in the meeting of the SEBI Advisory Committee on Mutual Funds. Accordingly, based on the recommendations of the Committee, it is advised that pending deployment of funds, the investments in short term deposits should be reported to the trustees along with the reasons for the investment which, interalia, would include comparison with the interest rates offered by other scheduled commercial banks.

Further, the AMCs shall ensure that the reasons for such investments are recorded in the manner prescribed in SEBI Circular MFD/CIR/6/73/2000 dated July 27, 2000.

The above clarification is being issued in accordance with Regulation 77 of the SEBI (Mutual Funds) Regulations, 1996.

Yours faithfully,

SURESH GUPTA

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