Personal Finance

SEBI strengthens risk management for liquid funds

The Securities and Exchange Board of India (SEBI) has updated the liquidity norms for liquid funds. SEBI has made it mandatory for liquid funds to hold at least 20% of its nett assets in liquid form. 

To comply with the SEBI norm, the liquid funds can hold liquid assets in cash, government securities, T-bills and repo on government securities.

In a case where the holding of the liquid assets falls below 20% of the nett assets of the liquid fund, the fund cannot make any further investments. For making any further investments, the fund house should first meet the 20% liquidity norm.

Also Read: SEBI: Debt Securities Will Soon Be Marked to Market

SEBI has also barred liquid funds and overnight funds from parking money in:

  1. Short-term deposits of scheduled commercial banks
  2. Debt securities having structured obligations (SO rating)
  3. Credit enhancements (CE rating)

The prohibition mentioned above is against parking money available with the funds but is pending deployment. However, the funds can park such money in debt securities with a government guarantee.

SEBI has further mandated an exit load on investors who exit within seven days of investing in a liquid fund. SEBI has directed the industry body AMFI (Association of Mutual Funds in India) to specify a minimum exit load on a graded basis.

The above norms would apply with effect from 1 April 2020.

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

Share

Recent Posts

Mutual Funds: SIP Inflows Breach Rs 19,000-Crore Mark for the First Time in February ’24

The systematic investment plan (SIP) contribution in February 2024 has crossed a new milestone. The monthly contribution tipped at Rs…

2 months ago

Income-Tax Return: A Brief Note on Annual Information Statement (AIS)

The Income-Tax (I-T) Department has directed taxpayers to access the Annual Information Statement (AIS) via the e-filing official portal and…

2 months ago

Mutual Funds: All About SIP and Market Fluctuations

Considering the vagaries of the stock market, investors often ponder over reevaluating their strategies. Whether to continue to remain invested…

2 months ago

Income-Tax Saving Through Strategic Life Insurance Planning

Financial planning is beyond just investing wisely to save on taxes; it's also related to protecting oneself and one's loved…

2 months ago

Income-Tax Return: Here’s a Note on Tax-Saving Avenues

A salaried individual earning up to Rs 5-15 lakh as net salary on an annual basis must first take stock…

2 months ago

A Quick Take on Equity-Linked Savings Scheme

Equity-linked savings schemes (ELSS), also referred to as tax-saving schemes, are equity funds that invest a significant portion of their…

2 months ago