New Delhi: Markets regulator Sebi is likely to come out with stricter rules for liquid mutual funds following the liquidity squeeze triggered by the Infrastructure Leasing & Financial Services (IL&FS) default, senior officials said on Monday.
Among the measures, the regulator is considering a short lock-in period for investments in liquid funds and allowing segregation of papers in default and illiquid ones from the ones that are liquid. This would create two funds — one with bad papers and another holding good papers, they added.
Besides, Sebi is looking to make it mandatory for liquid funds to mark-to-market the value of all bonds that have maturity of 30 days or more.
At present, fund houses need to consider the mark-to-market value of securities with a maturity of 60 days or more.
These steps are expected to be discussed at the Sebi-appointed mutual fund (MF) advisory committee meeting on Monday. After that, the regulator may come out with a consultation paper before putting in place final regulations, the officials said.
“The short lock-in period for investments in liquid funds may impact institutional investors,” Quantum Mutual Fund Managing Director and CEO Jimmy Patel said adding that liquid funds are very sought after by institutional investors as there are no restrictions on entry or exit.
Besides, institutional investors prefer to park their money in such funds due to higher liquidity of the schemes, he added. “A large part of audience for liquid funds is institutional investors. So, a change in the lock-in period impacts such institutional investors the most” said Aditya Bajaj, head, savings and investments, BankBazaar.com.
