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Debt Mutual Funds: Sebi Asks For Disclosure Based On Interest, Credit Risk

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Debt Mutual Funds: Sebi Asks For Disclosure Based On Interest, Credit Risk

Sebi has asked mutual funds to classify all debt schemes in terms of potential risk class matrix

Markets regulator Sebi has asked mutual funds to classify all debt schemes in terms of a potential risk class matrix, based on interest and credit risk.

For this purpose, a display table has been made mandatory from December 1, 2021, the Securities and Exchange Board of India (Sebi) said in a circular.

“It has been decided that all debt schemes also be classified in terms of a Potential Risk Class matrix consisting of parameters based on maximum interest rate risk (measured by Macaulay Duration (MD) of the scheme) and maximum credit risk (measured by Credit Risk Value (CRV) of the scheme),” Sebi said.

The decision has been taken based on the recommendation of the Mutual Fund Advisory Committee (MFAC) and discussions held with the mutual fund industry.

Sebi said asset management companies will have full flexibility to place single or multiple schemes in any cell of the Potential Risk Class matrix.

For the purpose of alignment of the existing schemes with the provisions of the new framework, each scheme will be placed in one of the nine cells specified by the regulator, while retaining their existing scheme category as specified under ‘Categorisation and Rationalisation of Mutual Fund Schemes’.

This would not be considered as a change in fundamental attribute.

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