SEBI introduces credit risk based single issuer limits for debt ETFs/ Index Funds

SEBI vide circular dated November 29, 2022 has introduced credit risk based single issuer limits for debt ETFs/ Index Funds in order to effectively manage the risk associated with such investments. Mutual Funds shall comply with following prudential limits for schemes other than Credit risk funds:

1. A mutual fund scheme shall not invest more than: a. 10% of its NAV in debt and money market securities rated AAA; or
2. 8% of its NAV in debt and money market securities rated AA; or
3. 6% of its NAV in debt and money market securities rated A and below issued by a single issuer.

The above investment limits may be extended by up to 2% of the NAV of the scheme with prior approval of the Board of Trustees and Board of Directors of the AMC, subject to compliance with the overall 12% limit.