Sebi relaxes investment limit by housing finance companies in debt mutual funds

In a respite for housing finance companies market regulator Securities and Exchange Board of India (Sebi) has decided to relax the investment limit for such entities in debt mutual fund.

In its Saturday meeting, the Sebi board allowed additional exposure in housing finance to debt mutual funds  over and above the 30 per cent cap for the financial services sector.

''It has been decided that an additional exposure to the financial services sector (over and above the existing 30 per cent) not exceeding 10 per cent of the net assets of the scheme in debt-oriented mutual fund schemes will be allowed by way of an increase in exposure to HFCs (housing finance companies) only,'' Sebi said in a press release.

Mutual funds were directed by Sebi last month to ensure that the total exposure of their debt schemes in a particular sector did not exceed 30 per cent of the net assets of the scheme.

According to R V Verma, chairman and managing director, National Housing Bank, the move would improve liquidity, temper interest rates and integrate the housing finance sector better with capital markets.

The market regulator added that the relaxation would be subject to certain conditions such as that the securities issued by HFCs were rated 'AA' or above, which would qualify companies such as HDFC, LIC Housing Finance, Religare, Dewan Housing and some others.