INDIA: Amendments to Investment Restrictions Regulations

Tuesday February 16 2016

The Securities and Exchange Board of India has announced amendments to investment restrictions for mutual fund schemes as follows:

• Amendment to rules relating to investments in debt instruments issued by a single issuer, wherein the limit is reduced to 10% of NAV. The limit may be extended to 12% of NAV with the prior approval of the Board of Trustees and the Board of Asset Management Company;
• Total exposure of debt schemes of mutual funds in a particular sector (excluding investments in Bank CDs, CBLO, G-Secs, TBills, short term deposits of scheduled commercial banks and AAA rated securities issued by Public Financial Institutions and Public Sector Banks) to be reduced from 30% to 25% of the net assets of the scheme;
• Total exposure of debt schemes of mutual funds in a group (including an entity, its subsidiaries, fellow subsidiaries, its holding company and its associates) shall not exceed 20% of the net assets of the scheme. This investment limit may be extended to 25% of the net assets of the scheme with the prior approval of the Board of Trustees.

These revised investment restrictions at issuer level, sector level and group level are applicable to all new schemes and fresh investments by existing schemes, effective 15^th February 2016.

Existing mutual fund schemes are required to comply with the revised investment restrictions at issuer level, sector level and group level within a period of one year from the date of issue of this circular.

Existing close ended schemes shall not be required to sell their investments to comply with the restrictions. However, if existing close ended schemes sell their investments then their fresh investments shall be subject to the restrictions.

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