A custodian in mutual fund operations is responsible for safely holding and protecting the fund’s securities and assets. They ensure that all shares, bonds, and cash belonging to the mutual fund are secure, correctly recorded, and managed. Custodians help in the smooth functioning of the mutual fund by handling settlement of trades, tracking dividends and interest, and keeping detailed records of all transactions. Their role is crucial in protecting investors' money and maintaining trust in mutual funds.
What Does a Custodian Do in Mutual Fund Operations?
The custodian holds the mutual fund’s securities in electronic or physical form. They take care of settling trades when the fund buys or sells assets, ensuring smooth transfer of securities and money. Custodians track corporate actions such as dividends, interest payments, stock splits, and bonuses. They keep detailed records to support auditing and compliance, ensuring transparency and accuracy in mutual fund operations.
How Does a Custodian Help Protect Investor Money?
Custodians protect investor money by securely holding all mutual fund assets and preventing loss, theft, or misuse. They maintain clear and accurate records of every asset and transaction. This helps investors trust the fund’s safety. Custodians also make sure the fund follows regulatory rules, providing an extra layer of protection for investors.
What Role Does a Custodian Play in Trade Settlement?
When the mutual fund buys or sells securities, the custodian ensures the transfer of shares and payment happens smoothly and on time. This settlement process is important to avoid any delays or errors that could affect the fund’s performance. Custodians reconcile transactions daily to make sure everything matches perfectly.
How Do Custodians Track Corporate Actions?
Custodians monitor all corporate actions like dividend payments, interest, bonus shares, and stock splits on behalf of the mutual fund. They make sure the fund receives these benefits correctly and updates the fund’s records accordingly. This helps the mutual fund reflect the true value of its investments.
Who Regulates Custodians in India?
In India, custodians operating for mutual funds are regulated by SEBI (Securities and Exchange Board of India). SEBI sets rules to make sure custodians keep investors’ money safe and maintain clear records. Only SEBI-registered custodians are allowed to work with mutual funds, ensuring a safe and trustworthy system.
How Does a Custodian Support Investor Confidence?
By securely holding assets, ensuring smooth settlements, and maintaining transparent records, custodians build trust among investors. They help make sure mutual funds operate honestly and follow laws. This confidence encourages more people to invest in mutual funds, helping grow the Indian investment market.
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