Existing grandfathered unlisted NCDs

Last updated: 30 April 2020

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This notification clarifies SEBI's stance on existing unlisted Non-Convertible Debentures (NCDs), referred to as 'identified NCDs'. These can continue to be held until maturity. Mutual funds are permitted to transact in these identified NCDs, and the criteria from the October 1, 2019 circular do not apply. However, all investments must still adhere to due diligence and other investment restrictions. Furthermore, the deadlines for complying with maximum investment limits in unlisted NCDs have been extended to September 30, 2020 (for 15% limit) and December 31, 2020 (for 10% limit).

Securities and Exchange Broad of India

SEBI/HO/IMD/DF2/CIR/P/2020/75

April 28, 2020

All Mutual Funds (MFs)/
Asset Management Companies (AMCs)/
Trustee Companies/ Board of Trustees of Mutual Funds/

Sir / Madam,

Subject: Existing grandfathered unlisted NCDs

1. SEBI vide Circular SEBI/HO/IMD/DF2/CIR/P/2019/104 dated October 01, 2019 has allowed the existing unlisted NCDs to be grandfathered till maturity, such NCDS are herein referred to as “identified NCDs”.

2. It is hereby clarified that the grandfathering of the identified NCDs is applicable across the mutual fund industry. Accordingly, mutual funds can transact in such identified NCDs and the criteria as specified in para B (1) of SEBI Circular dated October 1, 2019 is not applicable.

3. However, investments in such identified NCDs shall continue to be subject to compliance with investment due diligence and all other applicable investment restrictions.

4. Based on the request received, the timeline for compliance with the maximum limits for investment in unlisted NCDs (as issued vide SEBI Circulars dated October 01, 2019 and March 23, 2020) as 15% and 10% of the debt portfolio of the scheme is extended to September 30, 2020 and December 31, 2020 respectively.

5. This circular is issued in exercise of powers conferred under Section 11 (1) of the Securities and Exchange Board of India Act, 1992, read with the provisions of regulations 77 of SEBI (Mutual Funds) Regulations, 1996, to protect the interest of investors in securities and to promote the development of, and to regulate the securities market.

Yours faithfully,

Hruda Ranjan Sahoo
Deputy General Manager
Tel no.: 022-26449586
Email: hrsahoo@sebi.gov.in

FAQ :

Identified NCDs refer to existing unlisted Non-Convertible Debentures that SEBI has allowed to be grandfathered until their maturity.

Yes, mutual funds can transact in these identified NCDs, and the specific criteria mentioned in the SEBI Circular dated October 1, 2019, are not applicable to them.

Yes, investments in these identified NCDs must continue to comply with investment due diligence requirements and all other applicable investment restrictions.

The timeline for compliance with the maximum investment limits in unlisted NCDs has been extended. The 15% limit compliance is now due by September 30, 2020, and the 10% limit compliance is extended to December 31, 2020.

The relevant SEBI circulars for the investment limits are dated October 01, 2019, and March 23, 2020.

Notification No : SEBI/HO/IMD/DF2/CIR/P/2020/75
Source : https://www.sebi.gov.in/legal/circulars/apr-2020/existing-grandfathered-unlisted-ncds_46593.html

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