Sebi likely to rejig mutual fund categorisation norms to curb credit risk

Restrictions on lower-rated papers may be put in place across most debt fund categories

The Securities and Exchange Board of India (Sebi) may rework the current categorisation norms to mitigate risk in medium- and shorter-tenure debt mutual funds (MFs) that take credit risks.

Currently, most debt fund categories do not have restrictions on the amount of credit risk they can take. Credit risk funds and corporate bond funds are the only categories that define credit exposure — for the former, 65 per cent of assets has to be in papers rated ‘AA’ or below and, for the latter, 80 per cent of assets has to be in the highest-rated papers. 

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