Comments
The Reserve Bank of India has observed that investments made by mutual funds in corporate bonds may not have the risk premium commensurate with the corporate stress despite a large number of rating downgrades.
4% of AUMIn its Financial Stability Report released on Tuesday, RBI observed that the exposure of debt-oriented mutual fund schemes to corporate bonds as a percentage of their assets under management increased by 4 per cent between September 2015 and March 2016.
The exposure of debt-oriented mutual funds to corporate bonds that were downgraded in the last six months increased marginally to 1.8 per cent in end-March 2016 from 1.6 per cent in end-September 2015, RBI added.
SEBI recently revised prudential limits for sectoral exposure to 25 per cent from 30 per cent and reduced additional exposure limits with respect to housing finance companies (HFCs) in the financial sector to 5 per cent from 10 per cent.
SEBI also introduced prudential limit of 20 per cent of the net assets of a mutual fund scheme for group-level exposure.
Offshore derivativesOn offshore derivative instruments (ODIs), RBI observed the changes in ODI regulations being mostly procedural in nature do not substantially change the regulatory framework and FPI flows are not expected to be affected in the long term.
Key changes“One apprehension about these instruments is related to identification of the beneficial owners of such instruments. However, SEBI has tightened the regulations — permitting only sovereign funds and regulated entities to subscribe to these instruments,” RBI said.
The regulatory changes include applicability of Indian anti-money laundering (AML) norms for client due diligence by ODI issuing FPIs, prior permission of ODI issuing FPIs for allowing transfer of ODIs, reporting of complete transfer trail of ODIs, KYC review on regular basis and filing of reconfirmation report of the ODI position.
Apart from these, mandatory filing of suspicious transaction reports (STRs), if any, with the Indian Financial Intelligence Unit (FIU) in relation to the ODIs issued by them and periodic operational evaluation of systems and controls by FPIs ODI issuing are also there.
Comments
COMMENT NOW
Comments
Comments have to be in English, and in full sentences. They cannot be abusive or personal. Please abide by our community guidelines for posting your comments.
We have migrated to a new commenting platform. If you are already a registered user of TheHindu Businessline and logged in, you may continue to engage with our articles. If you do not have an account please register and login to post comments. Users can access their older comments by logging into their accounts on Vuukle.