Sebi boosts liquidity risk management for open-ended debt schemes

The market regulator has also asked AMFI to prescribe a suitable framework in this regard within one month. The framework will be adopted by all AMCs

The Securities and Exchange Board of India (Sebi) on Friday came out with a circular on prudential norms for liquidity risk management of the open-ended debt funds. Market participants say that this move will further increase liquidity in some of the categories of debt schemes.

The market regulator has also asked Association of Mutual Funds in India (AMFI) to prescribe a suitable framework, in consultation with it, for liquidity risk management for open ended debt schemes (except Overnight Fund, Gilt Fund and Gilt Fund with 10-year constant duration) within a period of one month. The said framework shall be adopted by all AMCs.

“For asset allocation limits (applicable for Banking and PSU Bond Fund, Floater Fund, Credit Risk Fund and Corporate Bond Funds scheme categories in terms of SEBI circular on ‘Categorization and Rationalization of Mutual Fund Schemes’) the base shall be considered as net assets excluding the extent of minimum stipulated liquid assets i.e. 10 per cent,” said the Sebi circular.

Sebi has also said that the framework specified by AMFI shall come into force with effect from December 1, 2021, for all the existing open ended debt schemes and schemes to be launched on or thereafter. However, mutual funds may, at their discretion, choose to adopt the framework specified by AMFI before the effective date.