SEBI vide notification dated June 8, 2023 has informed All Mutual Funds (MFs)/ Asset Management Companies (AMCs)/ Trustee Companies/ Board of Trustees of Mutual Funds/ Association of Mutual Funds in India (AMFI) additional directions to participate in in repo transactions on Corporate Debt Securities.
The prior circular provides that the Mutual funds shall participate in repo transactions only in AAA rated corporate debt securities. The new directions allows Mutual Funds to participate in repos on following corporate debt securities:
- Listed AA and above rated corporate debt securities
- Commercial Papers (CPs) and Certificate of Deposits (CDs)
The prior circular provides that the gross exposure of any mutual fund scheme to repo transactions in corporate debt securities shall not be more than 10 % of the net assets of the concerned scheme. The cumulative gross exposure through repo transactions in corporate debt securities along with equity, debt and derivatives shall not exceed 100% of the net assets of the concerned scheme.
The new circular provides that for transactions where settlement is guaranteed by a Clearing Corporation, the exposure shall not be considered for the purpose of determination of investment limits for single issuer, group issuer and sector level limits.