Latest News | Sebi Asks Debt MF Schemes to Hold 10 Pc Liquid Assets; Mandates Stress Testing 

New Delhi, Nov 6 (PTI) With an aim to ensure sufficient liquidity, markets regulator Sebi on Friday made it mandatory for debt mutual fund schemes to hold at least 10 per cent of their net assets in liquid assets.

Besides, it also mandated debt schemes to conduct stress testing.

Also Read | How to Set Up WhatsApp Payments on Your Smartphone to Send & Receive Money.

The new rules are aimed at improving risk management and ensuring sufficient liquidity.

"All open ended debt schemes (except overnight fund, liquid fund, gilt fund and gilt fund with 10-year constant duration) shall hold at least 10 per cent of their net assets in liquid assets," Sebi said in a circular.

Also Read | Tata Harrier CAMO Edition Launched in India at Rs 16.50 Lakh; Check Features, Variants & Specifications.

In case the exposure in such liquid assets falls below the threshold mandated, the asset management companies (AMCs) will have to ensure compliance with the requirement before making any further investment.

Liquid assets include cash, government securities, treasury bills and repo on government securities.

Currently, liquid schemes are required to hold a minimum 20 per cent in liquid assets. However, other debt oriented schemes have no such requirement.

"It is decided to mandate all open ended debt schemes (except overnight scheme) to conduct stress testing," the circular said.

Currently, stress testing is mandated for liquid funds and money market fund category.

Sebi further said a committee has been set up to deliberate on stress testing and give its recommendations.

The recommendations will be evaluated and based on the same, the norms regarding holding of liquid assets and methodology of stress testing may undergo change.

The guidelines on holding certain percentage in liquid assets would come into effect from February 1, 2021, and those on stress testing will become applicable from December 1, 2020, it said.

(The above story is verified and authored by Press Trust of India (PTI) staff. PTI, India’s premier news agency, employs more than 400 journalists and 500 stringers to cover almost every district and small town in India.. The views appearing in the above post do not reflect the opinions of LatestLY)