Mutual fund custodians subject to trustee appointment, oversight, notification and strict related party conditions including independence and net worth tests.

Trustees must appoint a custodian, enter a custodian agreement and notify the Board within fifteen calendar days, while maintaining oversight; the custodian provides safekeeping of scheme assets. A custodian with fifty per cent or more directors representing the sponsor cannot be appointed for that sponsor's funds. If the sponsor or its associates hold fifty per cent or more voting rights in the custodian, appointment is allowed only if the sponsor's net worth is at least twenty thousand crore rupees, a majority of custodian directors are independent of sponsor interests, the custodian and asset management company are not subsidiaries of each other, there are no common directors, and both entities undertake to act independently.

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