RBI stipulates conditions for RRBs to market MF units

Mumbai, May 17 (UNI) The Reserve Bank of India (RBI) today declared that Regional Rural Banks (RRBs) will be allowed to undertake marketing of units of mutual funds.

This has been done with a view to expanding the scope of business of the RRBs and also considering that marketing of Mutual Fund (MF) units provides a profitable avenue for banks, a RBI release issued here stated.

Accordingly, RRBs can now undertake marketing of units of MF, as agents with approval of their Board of Directors and also enter into agreements with MF for marketing their units. The apex bank has, however, laid down certain conditions for the banks to follow.

The RBI has stipulated that banks should only act as an agent of the customers, forwarding applications of the investors for purchase or sale of MF units to the mutual fund or Registrar or transfer agents and that the purchase of MF units should be at the risk of customers and without the bank guaranteeing any assured return.

Further, the apex bank has stipulated that the banks should not acquire such units of Mutual Fund from the secondary market nor should they buy back units of mutual funds from their customers.

The bank holding custody of MF units on behalf of its customers should also ensure that its own investment and investments belonging to its customers are kept distinct from each other while confining retailing of units of MFs to select branches of the bank to ensure better control.

Emphasising the fact that the banks should comply with the extant Know Your Customer (KYC) and Anti-Money Laundering (AML) guidelines in respect of the applicants, the apex bank called upon the RRBs to put in place adequate and effective control mechanisms in consultation with their sponsor banks.

''RRBs may report the details of the tie-up, together with a copy of the agreement entered into with the Mutual Fund, to our respective Regional Office within a period of ten days from the date of entering into the arrangement,'' the RBI said.

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