Capital market regulator SEBI has eased the valuation of debt and money market instruments held by mutual funds due to the lockdown announced by the government.
In a circular issued on Thursday, SEBI said mutual funds have to arrive at a process to ascertain case-to-case whether the default by the issuer was due to the nationwide lockdown and the three-month loan moratorium and deferment on payment permitted by the RBI.
Based on the assessment, SEBI said if the valuation agencies appointed by AMFI are of the view that the delay in payment of interest/ principal or extension of maturity of a security by the issuer has arisen solely due to the Covid-19 pandemic lockdown and the moratorium permitted by the RBI creating temporary operational challenges in servicing debt, then the valuation agencies may not consider the same as a default for the purpose of valuation of the money market or debt securities held by mutual funds.
However, it said if there is any difference in the valuation of securities provided by two valuation agencies, the conservative valuation shall be accepted. The relaxation in terms of valuation will be in force till the period of moratorium by the RBI as referred above, said SEBI.
Earlier, the RBI had directed banks and financial entities to give a three-month moratorium on all loans extended to individuals and corporates. This allowed individuals and corporates to delay their equated monthly instalments by three months. The announcement had provided big relief to borrowers who were facing liquidity issues as the entire country was locked down to fight the Covid-19 pandemic.