Special Situation Funds for investment in stressed assets to have minimum corpus of Rs 100 cr: Sebi

Under the norms, SSFs will invest only in stressed assets such as stressed loans available for acquisition in terms of RBI norms or as part of a resolution plan approved under the Insolvency and Bankruptcy Code (IBC).

illiquid stock options, illiquid stock options case, sebi, sebi news,
The Securities and Exchange Board of India (Sebi) observed large scale reversal of trades in stock options segment on the BSE

Capital markets regulator Sebi on Thursday said Special Situation Funds (SSFs) will invest only in stressed assets and have a minimum corpus of Rs 100 crore. The new framework will come into force with immediate effect, the Securities and Exchange Board of India (Sebi) said in a circular. This comes after Sebi on Monday amended AIF (Alternative Investment Funds) rules for introducing SSF, a sub-category under Category I AIF, which will invest in ‘special situation assets’.

The move assumes significance against the backdrop of continuing efforts to address the issue of stressed assets in the banking system. In its circular, Sebi said each scheme of SSF will have a corpus of at least Rs 100 crore. The minimum investment by an investor can be Rs 10 crore, whereas it can be Rs 5 crore in the case of an accredited investor. Further, in case of investors who are employees or directors of the SSF, or employees or directors of the manager of the SSF, the minimum value of investment will be Rs 25 lakh.

Under the norms, SSFs will invest only in stressed assets such as stressed loans available for acquisition in terms of RBI norms or as part of a resolution plan approved under the Insolvency and Bankruptcy Code (IBC). These funds will also invest in security receipts issued by Asset Reconstruction Companies (ARCs), securities of companies in distress and any other asset/security as may be prescribed by the board from time to time.

According to Sebi, SSF intending to act as a resolution applicant under IBC will have to ensure compliance with the eligibility requirements. Further, in respect of SSF acquiring stressed loan in terms of RBI norms, Sebi said the stressed loan acquired by it will be subject to a minimum lock-in period of six months. The lock in period shall not be applicable in case of recovery of the stressed loan from the borrower.

Get live Share Market updates and latest India News and business news on Financial Express. Download Financial Express App for latest business news.