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Sebi eases categorisation norms to allow debt MFs to add liquidity

Sebi eases categorisation norms to allow debt MFs to add liquidity

The Securities and Exchange Board of India (Sebi) has granted mutual funds’ (MFs’) request for allowing additional exposure to government securities (G-secs) and treasury bills (T-bills) for credit risk fund, corporate bond fund, and the banking & PSU fund.

The regulator has temporarily revised the scheme categorisation norms to make the option available for MFs. The higher limits can be availed for a period of three months.


On Monday, the market regulator, in a communication to MFs, allowed the three debt scheme categories an additional 15 per cent limit to invest in liquid securities, which will be optional for MFs.

Earlier, credit risk funds were required to make a minimum investment of 65 per cent in AA-rated and below-rated papers. However, the minimum levels have now been reduced to 50 per cent.

For corporate bond funds, the minimum investment in AA-plus and above-rated papers has been reduced to 65 per cent from 80 per cent. For banking & PSU debt funds, the minimum investment in debt instruments of banks, public sector undertakings, public financial institutions, and municipal bonds has been reduced to 65 per cent, from 80 per cent.

However, if there is a deviation from the recategorisation norms, MFs would need to obtain approval from the Board of Trustees, investment committee and the board of the MF.

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