Custodian

A custodian keeps safe custody of the securities a scheme owns. It is appointed by the trustees and registered with SEBI, which keeps the assets separate from the company that manages them.

What a custodian holds

When a mutual fund buys shares or bonds, those securities do not sit with the AMC that picks them; they are held by an independent custodian. The custodian records what the scheme owns, settles trades, and collects dividends and interest on the scheme’s behalf. In effect it is the vault, while the AMC is the decision-maker.

Why the separation protects you

This split is one of the structural safeguards that make mutual funds safe to use even though a private company runs them. Because the custodian, not the AMC, actually holds the assets, the fund house can never simply take your money. Even if an AMC failed, the securities bought with investors’ money are held apart, overseen by independent trustees and the custodian under SEBI’s rules. You do not choose or deal with the custodian directly; it works quietly in the background, but its existence is part of why your units represent real, separately held assets rather than an IOU from the fund company.