Sebi allows select debt funds to invest more in government bonds

Accepting the demands of the mutual fund industry body, capital markets regulator Sebi has allowed certain categories of debt funds to make additional investment in government bonds.

Sebi in a letter to Association of Mutual Funds of India (Amfi) said asset management companies (AMCs) can invest additional 15 per cent of the AUM of Corporate Bond Fund, Banking and PSU Fund and Credit Risk Fund in G-Secs and T-bills.

This is optional for asset managers and is valid for next three months only.

Corporate Bond Funds have to invest 65 per cent of total assets in AA+ and above rated papers, while Credit Risk Fund are mandated to invest minimum 50 per cent of assets in AA and below rated papers. Banking and PSU Funds have to invest 65 per cent of the assets in debt papers of banks and PSUs.

There has been an environment of risk aversion in recent months among mutual funds, especially after Franklin Templeton shut six schemes citing liquidity crunch in the debt market.

Mutual fund houses have started shying away from riskier assets. Nippon India MF on Monday said its schemes will make fresh investments in AA and above-rated issuers only.


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