The Securities and Exchange Board of India (SEBI) on June 08, 2023, issued a circular regarding the Participation of Mutual funds in repo transactions on Corporate Debt Securities with reference to SEBI vide circular no. CIR/IMD/DF/19/2011 dated November 11, 2011, and CIR/IMD/DF/23/2012 dated November 15, 2012, allowed mutual funds to participate in repo transactions on corporate debt securities.
The following has been decided:
• The Mutual Funds can participate in repos on the following corporate debt securities:
o Listed AA and above-rated corporate debt securities
o Commercial Papers (CPs) and Certificate of Deposits (CDs)
• For the purpose of consideration of credit rating of exposure on repo transactions for various purposes including for Potential Risk Class (PRC) matrix, liquidity ratios, Risk-o-meter, etc., the same shall be as that of the underlying securities, i.e., on a look through basis.
• For transactions where settlement is guaranteed by a Clearing Corporation, the exposure shall not be considered for the purpose of determination of investment limits for the single issuer, group issuer, and sector-level limits.
The provisions of this circular shall come into force with immediate effect.
[Circular No. SEBI/HO/IMD/IMD PoD-2/P/CIR]
