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MF exposure limits reduced by SEBI

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The Securities and Exchange Board of India (SEBI) tightened the rules on mutual fund exposure to corporate bonds by capping the investment limit in debt securities issued by a single company at 10% down from 15% of the net asset value of a scheme. The changes followed the crisis at JP Morgan Mutual Fund because of its exposure to the debt securities of Amtek Auto.

  • The sector-specific exposure limit has also been reduced from the current 30% of the NAV to 25%.
  • In the case of housing finance companies, the additional exposure cap has been cut to 5% from 10%.

MF exposure limits reduced by SEBISteps will mitigate risks arising from high levels of exposure in the event of credit downgrades, put mutual funds in a better position to handle adverse credit events even as it will provide mutual fund investors with enhanced diversification benefits.

Exit opportunity
Markets regulator approved a new set of norms to provide an exit route to all dissenting shareholders of the company.

Green Bonds
To help companies raise funds through green bonds for investment in the renewable energy space, SEBI approved new norms for such securities.

  • The issuance and listing of green bonds will be governed by the SEBI regulations for debt securities but the issuer of green bonds would have to make incremental disclosures. The definition of green bonds would be specified by SEBI from time to time.