The Securities and Exchange Board of India in its notification dated 23rd April 2020 has modified circular dated September 24, 2019 eased the valuation of money and debt market instruments held by mutual funds in view of the coronavirus pandemic and subsequent loan moratorium announced by the Reserve Bank of India.
The valuation agencies appointed by the Association of Mutual Funds in India (AMFI) provides valuation of money market and debt securities and recognize default of securities. The mutual funds have to arrive at a process to ascertain case-to-case whether the default by the issuer was due to the nationwide lockdown or three-month loan moratorium.
Based on the assessment, if the valuation agencies appointed by AMFI are of the view that the delay in payment of interest/principal or extension of maturity of security by the issuer has arisen solely due to COVID-19 pandemic lockdown and/or in light of the moratorium permitted by Reserve Bank of India creating temporary operational challenges in servicing debt, then valuation agencies may not consider the same as a default for the purpose of valuation of money market or debt securities held by mutual funds.
However, if there is any difference in the valuation of securities provided by two valuation agencies, the conservative valuation shall be accepted.
This Modified Notification shall be in force till the period of moratorium by the RBI.
Click here to read the Notification.
