AMFI proposes SEBI to increase borrowing limit for MFs

India Infoline News Service | Mumbai |

AMFI suggests SEBI to increase the current borrowing of mutual funds from 20% of assets under management in individual schemes to 40%

Mutual fund industry body AMFI (Association of Mutual Funds of India) has written to SEBI (Securities and Exchange Board of India) to consider an increase in the current borrowing limit for mutual funds, according to a media report.

AMFI has proposed the market regulator to increase the current borrowing of mutual funds from the current 20% of assets under management (AUM) in individual schemes to 40%, the report added.

The AMFI move comes after the large-scale redemption pressure seen in liquid funds last week, the report further said.

The borrowing limit allows asset management companies (AMCs) to borrow from banks an amount that is directly proportional to their AUM in a particular category. For instance, if the liquid assets of a fund house is Rs. 100 million, the fund house can borrow Rs. 20 million to meet its redemption needs.

on 17th July, Reserve Bank of India decided to conduct a special three-day repo at an interest rate of 10.25% for a notified amount of Rs. 250 billion with a view to enabling banks to meet the liquidity requirements of the mutual fund industry.
 

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