Breather for MFs: SEBI eases compliance norms for investment in unlisted NCDs; move aimed at increasing transparency

Mutual funds were required to comply with the highest investment limit of 15 percent and 10 percent in unlisted NCDs by 31 March and 30 June, respectively

Press Trust of India April 29, 2020 07:36:42 IST
Breather for MFs: SEBI eases compliance norms for investment in unlisted NCDs; move aimed at increasing transparency

New Delhi: Markets regulator SEBI on Tuesday extended the deadline by six months for mutual funds to comply with the highest limits of investment in unlisted non-convertible debentures (NCDs).

Mutual funds were required to comply with the highest investment limit of 15 percent and 10 percent in unlisted NCDs by 31 March and 30 June, respectively.

At the same time, the regulator has also eased compliance norms with regards to grandfathering of the existing unlisted NCDs, the Securities and Exchange Board of India (SEBI) said in a circular.

The move will give breather to the mutual funds as they will not be forced to stress-sell these existing unlisted NCDs.

Breather for MFs SEBI eases compliance norms for investment in unlisted NCDs move aimed at increasing transparency

SEBI logo. Pic courtesy: IBNLive

Under the norms, mutual funds need not to invest in unlisted debt instruments including commercial papers other than the government and money market instruments as well as derivative products such as interest rate futures (IRF), which are used for hedging by them.

These norms are aimed at enhancing the transparency and disclosure for investment in debt and money market instruments by mutual funds.

However, mutual fund schemes have been allowed to invest in unlisted NCDs not exceeding 10 percent of the debt portfolio of the scheme subject to the condition that such unlisted NCDs have a simple structure.

Now, the regulator has extended the timeline by 6 months for compliance with the highest investment limit of 15 percent in unlisted NCDs by 30 September, and 10 percent by 31 December.

Further, the grandfathering of the existing unlisted NCDs has been exempted from adherence from the maximum limit guidelines, subject to compliance with investment due diligence and all other applicable investment restrictions.

The regulator in October allowed existing investments of mutual fund schemes in unlisted debt instruments, including NCDs, to be grandfathered till maturity date of such instruments.

Updated Date:

also read

Equity mutual fund inflow hits 4-month low in September on profit booking, reveals AMFI data
Business

Equity mutual fund inflow hits 4-month low in September on profit booking, reveals AMFI data

Equity mutual funds witnessed a net inflow of around Rs 6,489 crore in September, the lowest in the last four months, due to profit-booking by investors after a rally in markets following a reduction in corporate tax

BSE to launch interest rate futures trading from 20 Jan
Investing

BSE to launch interest rate futures trading from 20 Jan

Earlier last month,Sebi had permitted the stock exchanges to introduce cash-settled IRFs on 10-year government bonds, which has been a long pending demand of capital market participants.

MCX-SX to offer interest rate futures, trading starts 20 Jan
Investing

MCX-SX to offer interest rate futures, trading starts 20 Jan

Sebi had said IRF will be introduced on a pilot basis and the product's features will be reviewed based on the experience gained. To begin with, the regulator had said that serial monthly contracts with a maximum maturity of three months would be available.