A Stitch In Time: SEBI Allows Mutual Funds To Segregate Distressed Assets In The Wake Of IL&FS CrisisSEBI (pic via Twitter)

Securities and Exchange Board of India (SEBI) has come up with the concept of side-pocketing, which allows segregation of portfolio to separate distressed assets from liquid part of a mutual fund scheme, Economic Times has reported. This move has been taken in the wake of IL&FS liquidity crisis.

“This provision has been triggered by the crisis at non-banking finance company (NBFCs). So, it is for the interest of retail investors that the toxic assets are segregated from the assets which are doing well. We think it is an appropriate time to introduce this provision,” Chairman of SEBI, Ajay Tyagi, explained the recent change in regulation.

In addition to this, the regulator also decided to issue a consultation paper on bringing uniformity in valuation process of corporate bonds. The regulator will also look into the valuation of distressed assets and debt exposures of mutual fund schemes.

Whole-time member of SEBI, Madhabi Puri Buch, said that the improvement was needed in two important areas. The first is the valuation of bonds and papers which have maturity period of less than 60 days, and papers which get downgraded below investment grade. The changes are required as the current guidelines are generic.

An Appeal...

Dear Reader,

As you are no doubt aware, Swarajya is a media product that is directly dependent on support from its readers in the form of subscriptions. We do not have the muscle and backing of a large media conglomerate nor are we playing for the large advertisement sweep-stake.

Our business model is you and your subscription. And in challenging times like these, we need your support now more than ever.

We deliver over 10 - 15 high quality articles with expert insights and views. From 7AM in the morning to 10PM late night we operate to ensure you, the reader, get to see what is just right.

Becoming a Patron or a subscriber for as little as Rs 1200/year is the best way you can support our efforts.

Become A Patron
Become A Subscriber