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Sebi hikes mutual funds' additional investment limit in HFCs to 15%

23 February 2017

Securities and Exchange Board of India (Sebi) has increased the additional exposure limit of mutual funds in housing finance companies (HFCs) in the financial services sector from 10 per cent to 15 per cent.

The present guidelines for sectoral exposure in debt oriented mutual fund schemes put a limit of 25 per cent at the sector level and an additional exposure not exceeding 10 per cent (over and above the limit of 25 per cent) in financial services sector only to HFCs.

The decision has been taken in light of the role of HFCs, especially in affordable housing and to further the government's goal under Pradhan Mantri Aawas Yojana (PMAY), a Sebi release stated.

"Mutual funds / AMCs shall ensure that total exposure of debt schemes of mutual funds in a particular sector (excluding investments in bank CDs, CBLO, G-Secs, TBills, short term deposits of scheduled commercial banks and AAA rated securities issued by public financial institutions and public sector banks) shall not exceed 25 per cent of the net assets of the scheme, provided that an additional exposure to financial services sector (over and above the limit of 25 per cent) not exceeding 15 per cent of the net assets of the scheme shall be allowed only by way of increase in exposure to housing finance companies (HFCs),'' Sebi stated in a release.

Further, Sebi said, the funds should ensure that the additional exposure to such securities issued by HFCs are rated AA and above and these HFCs are registered with National Housing Bank (NHB) and the total investment/ exposure in HFCs shall not exceed 25 per cent of the net assets of the scheme.

Mutual funds should make appropriate disclosures in scheme information document (SID) and key information memorandum (KIM) of debt schemes, it said, adding that all other conditions remain unchanged.

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