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Market regulator SEBI has allowed mutual funds to consider signing Inter Creditor Agreement by defaulted corporates due to Covid, and for lenders as a credit event, That debt investment is to be segregated separately for future recovery.
The development will come into force with immediate effect, said SEBI.
Earlier, SEBI had only listed downgraded (below investment grade by credit agencies) as a credit event for creating segregated portfolio.
In August, RBI allowed lending institutions to extend the resolution facility under ‘Prudential Framework for Resolution of Stressed Assets’ to borrowers having stress on account of Covid. In the said circular, RBI has allowed all lenders of the borrower to sign the Inter Creditor Agreement for resolving the stressed assets.
However, SEBI did not allow mutual funds to consider signing of such CRA by creditors as a credit event for segregation of asset.
On Wednesday, SEBI modified its earlier circular and said the date of CRA proposal for restructuring of debt received by AMCs can be treated as the trigger date for the purpose of creating segregated portfolio.
Such proposal of restructuring of debt received by AMCs shall be immediately reported to the valuation agencies, credit rating agencies, debenture trustees and AMFI.
In turn AMFI, on receipt of such information shall immediately disseminate it to its members, it said.
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