YES Bank crisis: Sebi may impose curbs on MFs' exposure to perpetual bonds

The Securities and Exchange Board of India (Sebi) is likely to impose limits on debt mutual funds’ (MFs’) exposure to the additional tier-I (AT-1) bonds, with the YES Bank crisis putting the spotlight on equity-like risks involved in such instruments, according to people in the know.

According to the data sourced from primemfdatabase.com, MFs’ exposure to the AT-1 bonds — also called perpetual bonds — stood at Rs 37,687 crore as of January 31, 2020.

Classified as a quasi-equity instrument, the AT-1 bonds are intended to provide additional cushion to a bank’s overall capital adequacy. However, in terms of risk,