SEBI Raises Minimum Investment Limit in PMS to Rs.50 Lakh

The Securities and Exchange Board of India (SEBI) has reportedly hiked the minimum investment limit in portfolio management service (PMS) to Rs.50 lakh. The PMS investment size by clients earlier stood at Rs.25 lakh.

The market regulator has also tightened the disclosure guidelines in the case of loan defaults. In the same line, the minimum portfolio mangers’ net worth requirements have also been increased from Rs.2 crore to Rs.5 crore.

As far as the unlisted securities are concerned, SEBI announced that portfolio managers are restricted from investing more than 25% of their assets under management (AUM) in the same.

Also Read: SEBI Permits MFs to Create Segregated Portfolios

With the minimum investment amount and the net worth requirements increased to Rs.50 lakh and Rs.5 crore respectively, market experts expect the new norms to bring down the number of potential investors, eventually slowing down the growth in PMS industry.

Over the last five years, the PMS industry has witnessed its assets grow by almost three times from Rs.48,000 crore in May 2014 to Rs.1.41 crore in June 2019.

On the other hand, SEBI’s new disclosure norms on loan defaults state that listed entities will disclose the default in cases where the repayment of principal or interest on loans from financial firms and banks has defaulted.

However, this is applicable only if the default period extends over 30 days from the date of the pre-agreed payment. Also, the disclosure of the default should be done within 24 hours from the 30th day. The new norms will be effective from 1 January 2019.

For any clarifications/feedback on the topic, please contact the writer at viswanathan.v@cleartax.in