Sebi tightens norms for mutual fund investments: Experts discuss

Coming down heavily on mutual fund players who in recent past chose to use shareholder fund to buy out the debt of bleeding invested companies, Sebi also said MFs can't have standstill agreements with companies and will take action against fund houses which had signed standstill pacts with companies.

After the board meeting, Sebi chairman Ajay Tyagi told reporters that the new risk management framework for liquid funds and prudential norms governing investment in debt and money market instruments by MFs are aimed at ensuring that risks to MF investors as well as shareholders of AMCs do not suffer because of the poor decisions of fund managers or promoters of debt issuing companies.

"Liquid schemes shall be mandated to hold at least 20 percent in liquid assets such as cash, g-secs, T-bills and repo on gilts," Tyagi said, adding Sebi has also reduced the sectoral cap to 20 percent from 25 percent earlier and also asked MFs to invest only in listed NCDs. "All fresh investments in commercial papers will be made only in listed papers," the regulator said.

To discuss the changes made by Sebi, CNBC-TV18 spoke to A Balasubramanian, CEO of Aditya Birla Sun Life AMC; Radhika Gupta, CEO of Edelweiss Asset Management and Kaustubh Belapurkar, director - fund research at Morningstar Investment Adviser India.