Friday, Aug 07, 2020 | Last Update : 01:21 AM IST

135th Day Of Lockdown

Maharashtra46826530552116476 Tamil Nadu2734602148154461 Andhra Pradesh1864611043541681 Karnataka151449746792804 Delhi1402321261164044 Uttar Pradesh104388605581857 West Bengal83800589621846 Telangana7095850814576 Gujarat65704485612529 Bihar6203140760349 Assam4816233429115 Rajasthan4667932832732 Haryana3779631226448 Odisha3768124483258 Madhya Pradesh3508225414912 Kerala279561629988 Jammu and Kashmir2239614856417 Punjab1901512491462 Jharkhand140705199129 Chhatisgarh10109761369 Uttarakhand8008484795 Goa7075511460 Tripura5520367528 Puducherry4147253758 Manipur301818147 Himachal Pradesh2879171013 Nagaland24056594 Arunachal Pradesh179011053 Chandigarh120671520 Meghalaya9173305 Sikkim7832971 Mizoram5022820
  Business   Market  12 Apr 2020  Mutual funds have sufficient flexibility, no further relaxations: SEBI

Mutual funds have sufficient flexibility, no further relaxations: SEBI

Published : Apr 12, 2020, 1:30 pm IST
Updated : Apr 12, 2020, 1:30 pm IST

Existing guidelines already have provisions for mutual funds to deviate from the valuation given by the valuation agencies

  SEBI - Deccan Chronicle Photo
  SEBI - Deccan Chronicle Photo

New Delhi: In the wake of the covid-19 crisis, mutual funds have been given a number of relaxations by regulator Sebi and they have got full flexibility regarding valuation of Pass Through Certificates including in case of moratorium on underlying loans, officials said on Sunday.

PTCs are certificates given to the investors including banks and mutual funds, where repayment comes from a basket or pool of underlying loans, usually loans taken by individuals. PTCs are usually issued by NBFCs, through a trust structure.


Officials said the fund houses already have sufficient flexibility under various Sebi regulations on valuation of PTCs and therefore no further relaxations are required to deal with the moratorium situation arising out of the COVID-19 crisis.

Recently, the industry body of mutual funds, the Association of Mutual Funds in India (AMFI), had written to Sebi regarding relaxation relating to valuation of PTCs if underlying loans are given a moratorium.

"On account of COVID related disruption, there is apprehension that there could be defaults in payment of interest or principal to the investors who have bought PTCs since interest and principal payments on PTCs is dependent on cash flows from the underlying loan pools," a senior official of an Asset Management Company (AMC) said.


"RBI has given banks permission to give moratorium to their borrowers. In this context, NBFCs have sought permission from the investors of PTCs also to grant moratorium to the borrowers of the underlying loans,” the AMC official added.

As per mutual fund regulations, any restructuring or moratorium type deferment of dues would mean that valuation agencies have to treat such securities as default and value them accordingly.

This regulation was brought in to ensure that NAVs of schemes are not inflated thereby permitting informed investors to exit at high NAV, leaving small retail investors with assets which may subsequently go bad, a market expert said.


However, since AMCs have the final responsibility of fair valuation of their schemes, Sebi regulations permit AMCs to deviate from the valuation given by the valuation agencies and determine their own fair valuation provided they take approval of the AMC Board and Trustees and disclose the same on their websites, an official said.

The Securities and Exchange Board of India (Sebi) is understood to have taken a view that "mutual funds already have full flexibility in valuation of PTCs in all scenarios including if moratorium is given to the underlying loans".

"Existing guidelines already have provisions for mutual funds to deviate from the valuation given by the valuation agencies," the official added.


Tags: covid-19, sebi, moratorium, mutual funds, cash flow, securities and exchange board of india (sebi), coronavirus impact
Location: India, Delhi, New Delhi