Participation of Mutual funds in repo transactions on Corporate Debt Securities

Last updated: 12 June 2023

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The Securities and Exchange Board of India (SEBI) has updated its regulations regarding mutual fund participation in repo transactions on corporate debt securities. Mutual funds can now engage in repos involving listed corporate debt securities rated AA and above, as well as Commercial Papers (CPs) and Certificates of Deposits (CDs). The credit rating for these repo transactions will be based on the underlying securities, and exposures from transactions guaranteed by a Clearing Corporation will not count towards investment limits.

Securities and Exchange Board of India Circular No. SEBI/HO/IMD/IMD PoD-2/P/CIR/2023/85 Dated: June 8, 2023 All Mutual Funds (MFs)/ Asset Management Companies (AMCs)/ Trustee Companies/ Board of Trustees of Mutual Funds/ Association of Mutual Funds in India (AMFI) Sir/Madam, Sub: Participation of Mutual funds in repo transactions on Corporate Debt Securities 1. SEBI vide circular no. CIR/IMD/DF/19/2011 dated November 11, 2011 and CIR/IMD/DF/23/2012 dated November 15, 2012

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FAQ :

Mutual funds can participate in repos on listed AA and above rated corporate debt securities, Commercial Papers (CPs), and Certificates of Deposits (CDs).

The credit rating for repo transactions will be considered on a look-through basis, meaning it will be the same as the underlying securities.

Yes, for transactions where settlement is guaranteed by a Clearing Corporation, the exposure will not be considered for single issuer, group issuer, and sector level investment limits.

The provisions of this circular come into force with immediate effect.

SEBI circulars CIR/IMD/DF/19/2011 dated November 11, 2011, and CIR/IMD/DF/23/2012 dated November 15, 2012, previously allowed mutual funds to participate in repo transactions on corporate debt securities.