The Securities and Exchange Board of India (SEBI) on November 29, 2022, issued a notification regarding the Introduction of a credit risk-based single issuer limit for investment by mutual fund schemes in debt and money market instruments.
The following has been stated namely: -
• The following prudential limits shall be followed, 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
b. 8% of its NAV in debt and money market securities rated AA; or
c. 6% of its NAV in debt and money market securities rated A and below
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.
• The long-term rating of issuers shall be considered for the money market instruments.
• If there is no long-term rating available for the same issuer, then based on credit rating mapping of CRAs between short-term and long-term ratings, the most conservative long-term rating shall be taken for a given short-term rating.
• Exposure to government money market instruments such as TREPS on G-Sec/T-bills shall be treated as exposure to government securities.
This shall be in effect from November 29, 2022.
[Notification No. SEBI/HO/IMD/IMD-1 DOF2/P/CIR/2022/164]
