Sebi prescribes norms for MFs' portfolio segregation

Mumbai: The Securities and Exchange Board of India (Sebi) said on Wednesday the date of proposal for restructuring of debt received by asset management companies (AMCs) should be treated as the trigger date for the purpose of creation of segregated portfolio of debt securities held in their schemes.

A segregated portfolio can be created in a mutual fund scheme by AMC in case the securities held by them are downgraded below investment grade and subsequent downgrades in credit rating.

The market regulator pointed that on August 6, the Reserve Bank of India (RBI) decided to provide a window under the June 7, 2019 prudential framework to enable lenders to implement a resolution plan in respect to eligible corporate exposures hit by Covid-19 pandemic- without change in ownership -- while classifying such exposures as standard assets.


RBI also allowed all lenders of the borrower to sign the Inter Creditor Agreement (ICA)for resolving the stressed assets.

Subsequently, Sebi on Tuesday asked credit rating agencies (CRAs) not to consider as default the restructuring of debt done solely due to Covid-19 related stress by lenders.

“Considering the above and in partial modification to aforementioned circular dated December 28, 2018,the date of proposal for restructuring of debt received by AMCs shall be treated as the trigger date for the purpose of creation of segregated portfolio,” Sebi said in a circular, adding that it comes into force with immediate effect.

The markets regulator also said that such debt restructuring proposal received by AMCs should be immediately reported to the valuation agencies, CRAs, debenture trustees and Association of Mutual Funds in India (AMFI).