A custodian bank is like a safe-keeper for a foreign fund’s money and assets. Here is how it works in simple steps:
- Holding the assets
- The foreign fund buys stocks, bonds, or other investments in India.
- The custodian bank keeps those investments in its name on behalf of the fund.
- Keeping records
- It keeps track of exactly how many shares or bonds the fund owns.
- It records every time the fund buys or sells something.
- Settlement of trades
- When the fund makes a trade, the custodian makes sure money and assets move correctly.
- It sends the payment to the seller and makes sure the shares arrive.
- Collecting income
- If a company pays a dividend or a bond pays interest, the custodian bank collects that money.
- Then it passes the money on to the foreign fund.
- Reporting and compliance
- The custodian gives regular statements to the fund showing what it holds and how much it is worth.
- It also helps meet local rules and tax requirements so the fund stays legal.