Sebi asks debt MF schemes to hold 10% liquid assets; mandates stress testing

By: |
November 6, 2020 9:02 PM

The new rules are aimed at improving risk management and ensuring sufficient liquidity.

Sebi also said a committee has been set up to deliberate on stress testing and give its recommendations.

With an aim to ensure sufficient liquidity, markets regulator Sebi on Friday made it mandatory for debt mutual fund schemes to hold at least 10 per cent of their net assets in liquid assets. Besides, it also mandated debt schemes to conduct stress testing.

The new rules are aimed at improving risk management and ensuring sufficient liquidity.

“All open ended debt schemes (except overnight fund, liquid fund, gilt fund and gilt fund with 10-year constant duration) shall hold at least 10 per cent of their net assets in liquid assets,” Sebi said in a circular.

In case the exposure in such liquid assets falls below the threshold mandated, the asset management companies (AMCs) will have to ensure compliance with the requirement before making any further investment.

Liquid assets include cash, government securities, treasury bills and repo on government securities.

Currently, liquid schemes are required to hold a minimum 20 per cent in liquid assets. However, other debt oriented schemes have no such requirement.

“It is decided to mandate all open ended debt schemes (except overnight scheme) to conduct stress testing,” the circular said.

Currently, stress testing is mandated for liquid funds and money market fund category.

Sebi further said a committee has been set up to deliberate on stress testing and give its recommendations.

The recommendations will be evaluated and based on the same, the norms regarding holding of liquid assets and methodology of stress testing may undergo change.

The guidelines on holding certain percentage in liquid assets would come into effect from February 1, 2021, and those on stress testing will become applicable from December 1, 2020, it said.

Get live Stock Prices from BSE, NSE, US Market and latest NAV, portfolio of Mutual Funds, calculate your tax by Income Tax Calculator, know market’s Top Gainers, Top Losers & Best Equity Funds. Like us on Facebook and follow us on Twitter.

Financial Express is now on Telegram. Click here to join our channel and stay updated with the latest Biz news and updates.

Next Stories
1Rakesh Jhunjhunwala made Rs 967 crore from these five stocks in November
2Petrol price crosses Rs 82-mark, diesel above Rs 72 a litre
3NDTV shares: Sebi bars two promoters, other individuals, entities for insider trading activities