As per The Economic Times Report, the market regulator Sebi is mulling over a proposal to tighten rules in respect of liquid mutual funds that hold assets of Rs. 8 lakh crore or more in valuation. The proposal comes up in the wake of recent debt default by the leading infrastructure financing company Infrastructure Leasing & Financial Services (IL&FS) which resulted in overall liquidity crisis for the NBFC sector.
The Securities and Exchange Board of India is eyeing a short lock-in period for investment channelized into liquid funds wherein mostly large companies deploy their idle cash holdings.
At the same time, SEBI may mandate liquid funds to mark to market the value of all bonds with maturity of 30 days or more as well as allow segregation of debt instruments that are in distress in the mutual fund folio. Further as per the report, these proposed measures are expected to be evaluated and discussed at the Sebi-appointed mutual fund advisory committee meeting on Monday.
Experts opine that introduction of lock-in period in case of liquid funds that primarily aims to reduce volatility in flows is likely to make the investment option less popular among institutional investor class.