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Last Updated : Sep 12, 2019 02:41 PM IST | Source: Moneycontrol.com

Commodities mutual fund: Where’s the hold-up & what’s causing the delay?

An industry official explained that who will take responsibility for goods lying in the warehouse of the custodian is one of the reasons why no one wants to assume the role of the commodity custodian

Tarun Sharma @talktotarun

After long consultations with the mutual fund industry, the Securities and Exchange Board of India (SEBI) had approved their participation in the commodity segment in May. However, delay in approval of custodian license has resulted in not a single asset management company being launched a mutual fund so far.

However, things seem to be looking up, with Deutsche Bank filing for a custodian license in the commodities space.

“SEBI’s investment management department requires a separate registration to be a custodian for the commodity segment, which is also one of the reasons for the delay,” a source close to development told Moneycontrol.

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However, a further digging reveals that this is just the tip of the problem.

An industry official explained that who will take responsibility for goods lying in the warehouse of the custodian is one of the reasons why no one wants to assume the role of the commodity custodian. “At present, only agriculture commodities stored in warehouses come under the Warehouse Development and Regulatory Authority. But there is no regulation for the non-agri segment, which is making interested parties uncomfortable,” he added.

Sources said that the mutual fund industry wants to start funds in this segment but SEBI’s investment management department is insisting on a custodian first.

The commodity market was hopeful that participation by institutional investors, which includes mutual funds and portfolio management service providers, would increase the market depth like it did when it opened investments in alternative investment funds three years back.
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First Published on Sep 12, 2019 02:40 pm
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