In a bid to boost growth of the corporate bond market, the Securities and Exchange Board of India (Sebi) allowed mutual funds to invest in repo transactions in securities such as commercial paper (CP) and certificates of deposit (CDs).
In addition, the capital markets regulator said that mutual funds can participate in repo transactions only in “AA” and above rated corporate debt securities, according to a circular.
For the purpose of consideration of credit rating of exposure on repo transactions, Sebi determined there would be equivalence to the underlying securities on a look-through basis. With regards to transactions where settlement is guaranteed by a clearing corporation, the exposure will not be considered for the purpose of determination of investment limits for single issuer, group issuer and sector level limits.