PART 2

By:-Brijesh lakho

MONEY MARKET MUTUAL FUNDS (MMMF)

the Reserve Bank of India (RBI) permitted the establishment of the Money Market Mutual Funds (MMMF) in the year 1992. The basic idea is the deployment of mutual funds' surplus funds in the money market. MMMF ensures high liquidity, adequate surety and high returns.

RBI GUIDELINES (23.11.1995)

MMMFs can be launched by banks, public financial institutions and private sector MFs. Units of MMMF can be issued to individuals only. No minimum return can be assured by the MMMF Minimum lock-in period is 15 days

RBI GUIDELINES (23.11.1995)

MMMF can be set up with the approval of the RBI only while private sector ones with the approval of the SEBI. Shares and units issued by the MMMF are subject to stamp duty. Funds received by the MMMF can be invested only in Treasury Bills, Government of India securities dated with an unexpired maturity up to one year, call loans to banks, CDs and CPs.

RBI GUIDELINES (23.11.1995)

MMMF should have a minimum investment of 25 per cent in the Treasury Bills and dated government securities minimum investment in call loans 30%, commercial bills 20% and CPS 15% (maximum exposure to a single company cannot be more than 3 per cent). RBI announced on 22-10-1997 that they can invest in rated corporate bonds and debentures, with residual maturity of up to one year.

UTI'S MONEY MARKET MUTUAL FUND (23.4.1997)

The Unit Trust of India (UTI) launched its Maiden Money Market Mutual fund (MMMF) on 23.4.1997. The minimum subscription amount has been pegged at Rs.10,000. The fund comes without a sale and redemption load with a nominal fee of Rs.20 charged for redemption transactions according to the RBI guidelines.

UTI'S MONEY MARKET MUTUAL FUND (23.4.1997)

MMMF can invest in money market instruments, but it has to have a lock-in period of 30 days. This is done to prevent competition to bank deposits.

COLLECTIVE INVESTMENT SCHEMES (CIS)

Under the SEBI Act and Regulations, no person can carry on any CIS unless he obtains a certificate of registration from SEBI. All existing collective investment schemes were required to apply for registration by December 14,1999. An existing scheme which does not obtain registration from SEBI shall have to wind-up and repay the money to the investors.

Salient features of collective investment schemes: CIS includes any schemes or arrangement with respect to property of any description, which enables investors to participate in the scheme by way of subscriptions and to receive profits or income or produce arising from the management of such property. Schemes structured for investment in shares/bonds and other marketable securities would not be treated as CIS.

LIST OF MUTUAL FUND COMPANIES IN INDIA

Public companies:UTI (1964 State Bank of India (SBI) (1987) Reliance Mutual Funds Bank of Baroda Canara Bank

Private companies:Kotak Mahindra ING saving MF Escort India MF CEAT MF Indus Ind MF

RETURN FROM MUTUAL FUNDS

Dividends Capital Gains Increase or Decrease in NAV MUTUAL FUND HOLDER'S ACCOUNT

Regular Account Accumulation Account Withdrawal Account Setting up Mutual Funds

FREQUENTLY USED TERMS

Net Asset Value (NAV) Sale Price Repurchase Price Valuation of Unit

Total market value of assets, or securities in the portfolio, of the fund Liabilities

NAV=

Number of funds units (shares) outstanding

(Market value of assets Liabilities excluding contingent liabilities, initial share capital, reserves & unit capital)+ (brokerage charges, commission .tax, stamp duties, other management & administrative expenses)
Sale Price =

Number of units outstanding

BUYING MUTUAL FUNDS

Contacting the Asset Management Company directly Agents/Brokers Financial planners Insurance agents Banks Online Trading Account