Tightened Norms on Mutual Funds Investments | 28 Jun 2019

The markets regulator Securities and Exchange Board of India (SEBI) has tightened norms on investments by mutual funds (MFs).

  • MF schemes can now invest only in listed debt or equity.
  • Valuation of securities in debt funds will now be on mark-to-market basis instead of the earlier practice of considering it on an amortisation basis.
  • Liquid funds can now invest a maximum of 20% of their assets in a single sector as against the current cap of 25%, and must keep aside at least a fifth of their assets in cash equivalents to meet sudden redemption pressures.

Mutual Fund: A mutual fund collects money from investors and invests the money, on their behalf, in securities (debt, equity or both). It charges a small fee for managing the money.

Liquid Funds: These are debt mutual funds that invest in securities up to a maturity of 91 days.