A custodian bank is a specialised financial institution that holds and safeguards the securities and other financial assets owned by mutual funds, foreign portfolio investors (FPIs), pension funds, insurance companies, and other institutional investors — on behalf of the beneficial owner. The custodian's core function is to provide secure custody of assets, settle trades, collect dividends and coupon payments, process corporate actions (such as bonus shares, rights issues, and splits), maintain records, and provide regular asset statements to the fund manager. In India, custodian banks are registered with and regulated by SEBI under the SEBI (Custodian of Securities) Regulations, 1996. Major custodian banks operating in India include Deutsche Bank, HDFC Bank, ICICI Bank, Axis Bank, and Kotak Mahindra Bank. For mutual funds, the custodian is distinct from the AMC and the Registrar and Transfer Agent (RTA) — it holds the physical and Demat securities of the fund's portfolio independently, providing a critical layer of operational segregation that protects investor assets from AMC insolvency or misconduct. Custody fees are included in the Total Expense Ratio (TER) of mutual fund schemes.
For android only
