  Let $C$ be a smooth irreducible complex projective curve of genus $g \geq 2$
and $M$ the moduli space of stable vector bundles on $C$ of rank $n$ and degree
$d$ with $\gcd(n,d)=1$. A generalised Picard sheaf is the direct image on $M$
of the tensor product of a universal bundle on $M\times C$ by the pullback of a
vector bundle $E_0$ on $C$. In this paper, we investigate the stability of
generalised Picard sheaves and, in the case where these are locally free, their
deformations. When $g\ge3$, $n\ge2$ (with some additional restrictions for
$g=3,4$) and the rank and degree of $E_0$ are coprime, this leads to the
construction of a fine moduli space for deformations of Picard bundles.
