In a bid to spice up progress of the company bond market, regulator Sebi on Thursday allowed mutual funds to put money into repo transactions in securities resembling Industrial Papers and Certificates of Deposits. As well as, the capital markets regulator mentioned that mutual funds can take part in repo transactions solely in “AA” and above rated company debt securities, based on a round.
In repo transactions, also referred to as a repo or sale repurchase settlement, securities are offered with the vendor agreeing to purchase them again at a later date. The instrument is used for elevating short-term capital.

For the aim of consideration of credit standing of publicity on repo transactions for numerous functions, together with for potential danger class matrix, liquidity ratios and risk-o-meter, Sebi mentioned the identical might be as that of the underlying securities on a look-through foundation.

As regards to transactions the place settlement is assured by a clearing company, the publicity is not going to be thought of for the aim of dedication of funding limits for single issuer, group issuer and sector stage limits.

The brand new provision would come into pressure with fast impact, the Securities and Trade Board of India (Sebi) mentioned.
Final month, Sebi got here out with a proposal for enabling direct participation by NBFCs, insurance coverage corporations and mutual funds within the tri-party repo section for company bonds to spice up liquidity within the secondary marketplace for company bonds.

Adblock check (Why?)