IL&FS effect: Sebi may review existing regulatory norms for liquid schemes

Besides reviewing the single-investor limit, the regulator is mulling whether a liquid scheme is the right place for money meant for banks' intra-day liquidity

The liquidity squeeze triggered by the Infrastructure Leasing & Financial Services (IL&FS) default has prompted the Securities and Exchange Board of India (Sebi) to review the existing regulatory framework for liquid schemes. 

The market regulator is considering new measures that will help these schemes manage liquidity and risks better, said industry sources. Among the suggested changes, Sebi could reduce the single-investor limit in liquid schemes, restrict the flow of “hot” money in such schemes, and direct such schemes to have larger liquidity buffers in tough markets. 

At present, the single-investor investment limit is pegged at 25 per cent of a