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NISM-Series-V-A: Mutual Fund Distributors · Legal Structure of Mutual Funds in India

Custodian, Registrar and Other Mutual Fund Service Providers

Updated 11 October 2026 · Fact-checked

A mutual fund relies on outside service providers. The custodian safekeeps securities and settles trades. The registrar and transfer agent (RTA) maintains unit holder records and processes transactions. The fund accountant keeps books and computes NAV. The auditor checks accounts. Depositories hold units in demat form. Exam questions ask you to match each provider to its role.

Understand Custodian, Registrar and Other Service Providers

A mutual fund is a trust. The sponsor sets it up, the trustees oversee it and the asset management company (AMC) manages money. None of these is meant to do every back-office job itself. So the fund appoints specialist service providers. Your exam tests whether you can match each provider to its job.

The custodian holds the securities of the schemes in safe custody. It also handles settlement of trades, collects dividends and interest, and tracks corporate actions such as bonus and rights issues. Under SEBI rules the custodian must be independent of the sponsor. A custodian cannot be an associate of the sponsor, and it must be registered with SEBI. The AMC decides what to buy and sell. The custodian does not take investment decisions.

The registrar and transfer agent (RTA) deals with unit holders. It keeps the register of unit holders, processes purchase and redemption applications, issues account statements, and handles dividend or income distribution payments and address or nomination changes. CAMS and KFintech are the well-known RTAs in India. An AMC may do this work in-house, but most use an RTA. If the RTA is an outside agency, it must be registered with SEBI.

The fund accountant maintains the books of the schemes and computes the NAV. The auditor is an independent chartered accountant who audits the fund's accounts. The auditor of the mutual fund must be different from the auditor of the AMC. Depositories (NSDL and CDSL) hold units in dematerialised form for investors who choose a demat account. Other providers include legal advisers, bankers and collection centres.

A simple memory line: custodian guards assets, RTA serves unit holders, accountant counts, auditor checks, depository holds units in demat.

Key formulas to remember

Custodian role
Custodian = safekeeping of securities + settlement + corporate action and income collection
It does not take investment decisions. It must be independent of the sponsor.
RTA role
RTA = unit holder records + transaction processing + statements + payouts
CAMS and KFintech are examples. An outside RTA must be SEBI registered.
Fund accountant role
Fund accountant = scheme books + NAV computation
Often outsourced by the AMC.
Auditor independence
Auditor of the fund ≠ auditor of the AMC
The fund's auditor must be a different person or firm from the AMC's auditor.
Depository role
Depository (NSDL, CDSL) = holding units in demat form
Holding units in demat is the investor's option.

How to solve Custodian, Registrar and Other Service Providers questions

Most questions ask who does what, or which statement is correct. Use the same method each time.

  1. 1Read the task in the question: safekeeping, records, NAV, audit or demat holding.
  2. 2Link the task to one provider using the memory line: custodian guards, RTA serves, accountant counts, auditor checks, depository holds.
  3. 3Check whether the question is about a decision (AMC or trustees) or an administrative task (service provider).
  4. 4For independence or registration questions, recall that the custodian must be independent of the sponsor and an outside RTA must be SEBI registered.
  5. 5Eliminate options that swap two providers, such as custodian handling unit holder statements.
  6. 6Choose the option that fits the task exactly, not one that is merely related.

Quickest way: One-word match

When to use it: Use when the question asks which entity performs a given function.

  1. Turn each provider into one word: securities, units, NAV, audit, demat.
  2. Spot the keyword in the question: securities settlement, account statement, NAV computation, audit, demat units.
  3. Pick the matching provider and skip options with mixed roles.
  4. Watch for words like not or except and re-read the answer once.

Common mistakes in Custodian, Registrar and Other Service Providers

  • Saying the custodian maintains unit holder records.

    Both custodian and RTA sound like record keepers.

    Fix: Custodian keeps securities. RTA keeps unit holder records.

  • Thinking the custodian decides which securities the scheme buys.

    It holds the portfolio, so students assume it controls it.

    Fix: Investment decisions belong to the AMC under trustee oversight. The custodian only holds and settles.

  • Believing the custodian can be an associate of the sponsor.

    Students forget the independence requirement.

    Fix: Remember the custodian must be independent of the sponsor.

  • Assuming the same auditor can audit both the fund and the AMC.

    It seems efficient, so it looks allowed.

    Fix: The fund's auditor must differ from the AMC's auditor.

  • Treating depositories as the RTA or custodian of the scheme.

    NSDL and CDSL are also called custodians of securities in general talk.

    Fix: For mutual funds, depositories hold units in demat form for investors. The scheme's own assets sit with the custodian.

  • Assuming every investor must hold units in demat.

    Demat is promoted widely.

    Fix: Demat holding is an option. Units can also be held as a statement of account with the RTA.

Worked examples

Example 1

Which of the following is the primary function of the custodian of a mutual fund? (a) Maintaining unit holder records (b) Safekeeping of securities and settlement of trades (c) Computing the NAV of schemes (d) Auditing the fund accounts

Show the solution
  1. Identify the task: the question asks about the custodian.
  2. Recall that the custodian guards securities and settles trades.
  3. Option (a) belongs to the RTA, (c) to the fund accountant and (d) to the auditor.
  4. Only option (b) fits.

Answer: (b) Safekeeping of securities and settlement of trades

Example 2

Which of the following statements about service providers to a mutual fund is correct? (a) The custodian may be an associate of the sponsor (b) The fund's auditor must be the same as the AMC's auditor (c) The RTA processes purchase and redemption applications and issues account statements (d) The custodian decides which securities the scheme buys

Show the solution
  1. Test (a): the custodian must be independent of the sponsor, so it is wrong.
  2. Test (b): the fund's auditor must be different from the AMC's auditor, so it is wrong.
  3. Test (c): processing transactions and issuing statements are RTA tasks, so it is correct.
  4. Test (d): investment decisions are made by the AMC, so it is wrong.

Answer: (c) The RTA processes purchase and redemption applications and issues account statements

Exam tips

  • Practise the match: custodian to securities, RTA to unit holders, accountant to NAV, auditor to audit, depository to demat.
  • Watch for independence traps: custodian from the sponsor and the same auditor for fund and AMC are both wrong.
  • Remember CAMS and KFintech as RTA examples, not custodians.
  • Questions are often framed as except or not. Read the last line twice.
  • For the NISM-Series-V-A there is no negative marking, so always attempt every question.

Practice questions from Legal Structure of Mutual Funds in India

Custodian, Registrar and Other Service Providers: frequently asked questions

What is the role of a custodian in a mutual fund?

The custodian holds the scheme's securities in safe custody and handles trade settlement. It also collects income and tracks corporate actions on the securities. It does not take investment decisions.

What does a registrar and transfer agent do?

The RTA maintains the unit holder register and processes purchase and redemption requests. It sends account statements and handles payouts and account changes. CAMS and KFintech are common examples.

What is the difference between a custodian and a registrar?

The custodian looks after the fund's securities. The registrar looks after unit holder records and transactions. One serves the portfolio and the other serves the investors.

Who calculates the NAV of a mutual fund scheme?

The fund accountant maintains the books and computes the NAV. The AMC is responsible for it and often outsources the accounting work.