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ARTICLE · 19 FEBRUARY 2016

Restrictions On Debt-Oriented Mutual Fund Schemes By The SEBI

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The Circular is intended as a step towards providing mutual fund investors enhanced diversification benefits by reducing concentration risk.

IndiaFinance and Banking
Ashwin Bishnoi
Ashwin Bishnoi
Rupsa Mitra
Rupsa Mitra
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With a mandate to safeguard investors' interest, the Securities and Exchange Board of India (SEBI) has notified Circular No SEBI/HO/IMD/DF2/CIR/P/2016/35 dated 15 February 2016 (Circular) tightening its norms for mutual funds' exposure to riskier corporate bonds.

Applicability of the Circular

The revised investment restrictions at the issuer, sector and group level would be applicable to all new schemes and fresh investments by existing schemes from the date of the Circular, while the existing schemes will have to comply with the new norms within a period of one year.

What are the changes introduced by the Circular?

In a previous amendment on 12 February 2016, SEBI had imposed restrictions on mutual fund investments in debt instruments comprising money market instruments and non-money market instruments issued by a single issuer which had not been rated below investment grade. This amendment has reduced the concentration limit of 15% of net assets value (NAV)

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