SEBI decides to introduce a similar credit rating based single issuer limit for actively managed mutual fund schemes

Circular No. SEBI/HO/IMD/IMD-1 DOF2/P/CIR/2022/164, Dated 29.11.2022

Pursuant to SEBI (MFs) Regulations, 1996, a mutual fund scheme shall not invest more than 10% of its NAV in debt instruments, issued by a single issuer, comprising money market securities and non-money market securities. Now, the SEBI has decided to introduce a similar credit rating based single issuer limit for actively managed mutual fund schemes.

In order to avoid inconsistency in investment by mutual funds in debt instruments of an issuer, irrespective of the scheme being actively or passively managed, the SEBI has decided to introduce a similar credit rating based single issuer limit for actively managed mutual fund schemes.

Accordingly, the SEBI has directed all Asset Management Companies/ Mutual Funds/Association of Mutual Funds in India that MF scheme shall not invest more than 10% of its NAV in securities rated AAA, 8% of its NAV in securities rated AA and 6% of its NAV in debt and money market securities rated A and below.

Further, SEBI has clarified that 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 specified in MF Regulations.

The circular shall be applicable for all the new schemes to be launched with effect from 29-11-2022. The existing schemes shall be grandfathered from these guidelines till the maturity of the underlying debt and money market securities.

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