TMI BlogReview of investment norms for mutual funds for investment in Debt and Money Market InstrumentsX X X X Extracts X X X X X X X X Extracts X X X X ..... er 23, 2019 on amendments to SEBI (Mutual Funds) Regulations, 1996 is enclosed for reference. B. Investment in Listed and Unrated Debt instruments In order to enhance transparency and 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 ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... or mutual fund schemes whose existing investments in unlisted NCDs are more than the threshold limit as on the timeline mentioned at paragraph B(2)(a), all fresh investments in NCDs by mutual fund schemes, shall only be in listed NCDs till they comply with the above mentioned requirements. 3. For the purpose of the provisions of paragraph B, listed debt instruments shall include listed and to be listed debt instruments. 4. All fresh investments by mutual fund schemes in CPs would be made only in CPs which are listed or to be listed with effect from one month from the date of operationalization of framework for listing of CPs or January 01, 2020, whichever is later. 5. Further, investment in unrat ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ment grade and b. Supported rating of debt instruments (i.e. after factoring-in credit enhancement) is above investment grade. 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. 2. Investment limits as mentioned in paragraph C(1) above shall not be applicable on investments in securitized debt instruments, as defined in SEBI (Public Offer and Listing of Securitized Debt Instruments) Regulations 2008. 3. Investment in debt instruments, having credit enhancements backed by equity shares directly or indirectly, shall have a minimum cover of 4 times consideri ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... lowed for investments in securitized debt instruments based on retail housing loan portfolio and/or affordable housing loan portfolio. However the overall exposure in HFCs shall not exceed the sector exposure limit of 20% of the net assets of the scheme. c. Further, appropriate disclosures in this regard shall be made in Scheme Information Document (SID) and Key Information Memorandum (KIM) of debt schemes. E. Group Level Exposure Limits 1. In partial modification to paragraph B(3)(a) regarding investment limits on group exposure as specified in SEBI Circular No. SEBI/HO/IMD/DF2/CIR/P/2016/35 dated February 15, 2016 , the following additional provisions have been decided: ..... X X X X Extracts X X X X X X X X Extracts X X X X ..... ke appropriate measures and report the same to trustees. G. Applicability 1. The provisions at paragraph C shall be effective for all fresh investments with effect from January 1, 2020. 2. The revised exposure limits at sector level as specified in paragraph D shall be applicable as under: a. All new schemes and fresh investments by existing schemes shall henceforth be in compliance with the revised exposure limits. b. Existing open ended mutual fund schemes shall comply with the revised limits for sector exposure by April 01, 2020. c. The investments of existing close ended and interval schemes may be grandfathered. However, if such close ended ..... X X X X Extracts X X X X X X X X Extracts X X X X
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