Collecting bankers
Also written Collecting banker · Collecting bank · Collection bank
The banks a mutual fund scheme appoints to collect investors' payments into its collection accounts, send back reverse feeds of cleared and bounced instruments, and confirm NFO collections before allotment.
In plain language
Money for a mutual fund purchase has to land somewhere before it can be invested. A scheme appoints one or more collecting bankers for that purpose, and their names and branches are listed in the NFO application form.
The collecting banker sits between three parties. Investors' cheques and transfers go into it. Clearing status goes out of it, to the AMC and the RTA. And during an NFO its branches become a place where investors can hand in the application itself.
It is the bank side of the reconciliation the RTA runs on every rupee: the registrar's record says what investors applied for, and the collecting banker's record says what actually arrived.
How it works
The workbook lists the functions of collecting bankers:
- They collect payment instruments through the clearing process to realise the funds paid by investors.
- They provide reverse feeds showing the cleared or bounced status of instruments.
- NFO collecting bankers accept NFO applications. After the NFO they provide a "collections confirmation certificate", and the bank's collection figures are reconciled with the R&T agent's records before allotting units.
Why bank branches can take NFO forms. Since the NFO price applies uniformly to all purchases during the NFO period, there is no time stamping requirement — so the collecting bank's branches are also available for collecting NFO applications and payment instruments. Outside the NFO, time stamping and cut-off timings decide the applicable NAV, so that reasoning no longer applies.
How deposits are identified. Instruments collected at ISCs and AMC offices are deposited into the collecting bank using manual pay-in slips or system-generated pay-in slips using scheme CMS codes. The bank gives each scheme a CMS code; its branches upload the soft copy of pay-in details into its Cash Management Service, and the banker notifies the AMC and RTA of each instrument's status.
The account they collect into is one of four kinds a scheme maintains: collection accounts (investments in), investment accounts (kept by the custodian to settle securities), redemption accounts (funded to pay out), and expense accounts.
A worked example
Illustrative numbers.
A new equity scheme runs an NFO at Rs 10 per unit through two collecting bankers. When the offer closes, the RTA has application records totalling Rs 412.75 crore. The collecting bankers' collections confirmation certificates add up to Rs 412.60 crore.
| Source | Amount |
|---|---|
| RTA's application records | Rs 412.75 crore |
| Collecting bankers' certificates | Rs 412.60 crore |
| Difference | Rs 15 lakh |
Units cannot be allotted until the two agree. The RTA works through the bankers' reverse feeds and finds cheques totalling Rs 15 lakh marked bounced. Those applications are rejected; no units go to them.
The reconciled figure is Rs 412.60 crore:
Units allotted = 412.60 crore ÷ Rs 10 = 41.26 crore units
Ignoring stamp duty, that is also the scheme's opening unit capital: Rs 412.60 crore.
One of the investors, Mrs Menon, had walked into a collecting bank branch on the last day of the NFO with her form and cheque. Nobody time stamped it, and nobody needed to: every NFO applicant gets the same Rs 10 price.
Why NISM asks about it
Chapter 13 (Banking Operations in Mutual Funds) covers collecting bankers in section 13.3, together with the four kinds of scheme bank account and the Cash Management Service, and lists their functions in full. Chapter 11 (Operational Concepts of Mutual Funds) supplies the NFO sequence — the no-transaction period and allotment — into which that reconciliation fits. Chapter 14 sample questions use "collecting bank" as a distractor — for example, it is the R&T agent, not the collecting bank, who records the application under the folio number.
Common exam traps
- Collecting bank branches can accept NFO applications because there is no time stamping in an NFO — the NFO price is uniform. The reasoning is specific to the NFO.
- The collections confirmation certificate comes after the NFO, and allotment waits for reconciliation with the RTA's records.
- Reverse feeds show cleared or bounced status. That feed is what stops units being issued on a returned cheque.
- Collecting bankers do not record investor details under the folio. The R&T agent does.
- Investment accounts are maintained by the custodian, not the collecting banker — collection, investment, redemption and expense accounts are different accounts.
- A scheme may appoint more than one collecting banker, and they are named in the NFO application form.
Where this is taught
Free preparation for NISM Series II-BRelated terms
- Cheque Truncation SystemAn RBI system, started in 2010, in which the physical cheque stops at the presenting bank and an electronic image travels to the drawee bank for payment, cutting clearing time, transit cost and delay.
- CustodianThe SEBI-registered entity that holds a fund's securities in accounts of its own and settles its trades, so the assets sit somewhere other than with the manager who decides what to buy.
- New Fund OfferThe period in which a mutual fund scheme's units are offered to the public for the first time, at a fixed NFO price rather than at NAV, and during which the registrar builds the scheme's first register of investors.
- NIGOA transaction the registrar has flagged as "Not in Good Order" because the application and the money do not reconcile or the paperwork is defective — units are not issued until it is fixed.
- Official Point of AcceptanceA location a mutual fund has formally designated to receive transaction requests, where the application is time-stamped — and that stamp, not the moment the investor handed the form over, decides which NAV applies.
- Registrar and Transfer AgentThe SEBI-registered agency that keeps the investor records of a mutual fund — processing purchases and redemptions, updating folios and unit capital, and issuing account statements.
- NEFTNational Electronic Funds Transfer — a nation-wide system that moves money between bank accounts in batches, round the clock, with no RBI-imposed amount limit; a standard route for mutual fund purchases and pay-outs.