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Friday, October 23, 2020

Minimum holding in liquid assets for debt schemes, stress testing in Sebi plans

Sebi Chairman Ajay Tyagi said this is aimed at improving liquidity in debt schemes. Overnight funds are invested in liquid assets and there is provision to hold liquid to invest 20 per cent in liquid assets. “However, there’s no such stipulation for other debt schemes,” he said.

By: ENS Economic Bureau | Mumbai | September 23, 2020 3:00:18 am
The regulator is also considering a proposal to set up a stress testing methodology for open-end debt schemes. (File)

Five months after Franklin Templeton shut down six credit risk schemes due to huge redemption pressure, the Securities and Exchange Board of India (Sebi) on Tuesday said it is planning to make it mandatory for debt mutual fund schemes to invest a certain percentage of liquid assets in debt in order to improve risk management system. The regulator is also considering a proposal to set up a stress testing methodology for open-end debt schemes.

Sebi Chairman Ajay Tyagi said this is aimed at improving liquidity in debt schemes. Overnight funds are invested in liquid assets and there is provision to hold liquid to invest 20 per cent in liquid assets. “However, there’s no such stipulation for other debt schemes,” he said.

“MFs are not banks and should not attempt to behave like one, and they must protect the interest of unitholders,” Tyagi said.

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