The Securities and Exchange Board of India issued a circular on prudential norms for liquidity risk management for open ended debt schemes on June 25, 2021. The circular has specified norms regarding holding of liquid assets in open ended debt schemes & stress testing of open-ended debt schemes.
A committee was set up to deliberate on norms regarding holding of liquid assets in open ended debt schemes. SEBI has advised Association of Mutual Funds in India (AMFI) to prescribe a suitable framework, in consultation with it, for liquidity risk management for open ended debt schemes (except Overnight Fund, Gilt Fund and Gilt Fund with 10-year constant duration) within a period of one month. The said framework shall be adopted by all AMCs.
This framework specified by AMFI as referred under para 2 shall come into force with effect from December 1, 2021, for all the existing open ended debt schemes (except Overnight Fund, Gilt Fund and Gilt Fund with 10 year constant duration) and schemes to be launched on or thereafter. However, mutual funds may at their discretion, choose to adopt the framework specified by AMFI before the effective date.
*Tanvi Singh, Editorial Assistant has put this story together.