Mutual funds likely to get Sebi lifeline to tide over liquidity woes

Market regulator likely to relax 20% cap on MF borrowing

The Securities and Exchange Board of India (Sebi) is likely to throw a lifeline to the Rs 25-trillion mutual fund (MF) industry to tide over the current liquidity crisis, triggered by inactivity in the bond market and a surge in redemption requests.
 

The capital market regulator is considering easing the 20 per cent borrowing cap for debt mutual funds if liquidity challenges persist, said people with direct knowledge of the development.
 

According to Sebi regulations, an MF scheme is allowed to borrow up to 20 per cent of its net assets for six months. This provision comes in handy in