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Review of investment norms for mutual funds for investment in Debt and Money Market Instruments

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..... nd disclosure for investment in debt and money market instruments by mutual funds, the following has been decided: 1. Mutual fund scheme shall not invest in unlisted debt instruments including commercial papers (CPs), other than (a) government securities, (b) other money market instruments and (c) derivative products such as Interest Rate Swaps (IRS), Interest Rate Futures (IRF), etc. which are used by mutual funds for hedging. However, mutual fund schemes may invest in unlisted Non-Convertible Debentures (NCDs) not exceeding 10% of the debt portfolio of the scheme subject to the condition that such unlisted NCDs have a simple structure (i.e. with fixed and uniform coupon, fixed maturity period, without any options, fully paid up upfront, w .....

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..... nth from the date of operationalization of framework for listing of CPs or January 01, 2020, whichever is later. 5. Further, investment in unrated debt and money market instruments, other than government securities, treasury bills, derivative products such as Interest Rate Swaps (IRS), Interest Rate Futures (IRF), etc. by mutual fund schemes shall be subject to the following: a. Investments should only be made in such instruments, including bills re-discounting, usance bills, etc., that are generally not rated and for which separate investment norms or limits are not provided in SEBI (Mutual Fund) Regulations, 1996 and various circulars issued thereunder. b. Exposure of mutual fund schemes in such instruments, shall not exceed 5% of the net .....

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..... hares. AMCs may ensure that the investment in debt instruments having credit enhancements are sufficiently covered to address the market volatility and reduce the inefficiencies of invoking of the pledge or cover, whenever required, without impacting the interest of the investors. In case of fall in the value of the cover below the specified limit, AMCs should initiate necessary steps to ensure protection of the interest of the investors. 4. The existing investments by mutual fund schemes in debt instruments that are not in terms of the provisions of paragraph C may be grandfathered till maturity date (as stands as on the date of this circular) of such debt instruments. 5. Details of investments in debt instruments having structured obligat .....

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..... . Such investment limit may be extended to 15% of the net assets of the scheme with the prior approval of the Board of Trustees. b. For the purpose of this provision, Group shall have the same meaning as defined in paragraph B(3)(b) of SEBI Circular No.SEBI/HO/IMD/DF2/CIR/P/2016/35 dated February 15, 2016. F. Internal Credit Risk Assessment at the AMC Paragraph-D of SEBI Circular No.SEBI/HO/IMD/DF2/CIR/P/2016/42 dated March 18, 2016, on internal credit assessment is modified as under: In order to ensure that mutual funds are able to carry out their own credit assessment of assets and reduce reliance on credit rating agencies, all AMCs are required to have an appropriate policy and system in place to conduct an in-house credit risk assessmen .....

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