Sebi clears liquidity holding norms for debt MFs

For instance, corporate bond funds have to invest at least 80% of their assets in debt rated AA+ and above (MINT_PRINT) — For instance, corporate bond funds have to invest at least 80% of their assets in debt rated AA+ and above **(MINT_PRINT)**

1 min read . Updated: 25 Jun 2021, 10:20 PM IST Neil Borate

The Securities and Exchange Board of India (Sebi) on Friday issued the guidelines for calculating mandatory liquid holdings in debt mutual funds

The Securities and Exchange Board of India (Sebi) on Friday issued the guidelines for calculating mandatory liquid holdings in debt mutual funds. In November 2020, the regulator had said that debt mutual funds have to invest at least 10% of assets in liquid papers, such as cash, treasury bills, government securities (G-Sec) and repurchase agreements, or repo.

According to Sebi, while the liquidity portion will not be excluded while calculating the limits on Macaulay duration, riskometer and issuer, besides group and sector exposure, the mandatory liquid portion will be excluded for rules on asset allocation. For instance, corporate bond funds must invest at least 80% of assets in debt rated AA+ and above. According to Sebi, this will be counted as 80% of the 90% non-liquid section of the portfolio, which translates to 72% of the overall portfolio. Liquid funds, which are subject to a higher 20% liquid threshold, overnight funds and G-Sec funds, were exempt from this rule.