Clearing House To Boost Corporate Bond Market
MFs to contribute Rs 150 crore towards the share capital of Limited Purpose Clearing Corporation
The Securities and Exchange Board of India (Sebi) has announced the setting up of a Limited Purpose Clearing Corporation (LPCC) by Asset Management Companies (AMC) of Mutual Funds (MFs). The move comes after Sebi’s objective of the development of the corporate bond market from the perspective of mutual funds.
“The Working Group recommended that AMCs of Mutual Funds should set up a Limited Purpose Clearing Corporation (LPCC) for clearing and settling repo transactions in corporate debt securities by contributing an amount of Rs 150 crore,” says Sebi.
With this set-up, the MFs would be the natural beneficiaries of such a clearing corporation, as they are required to contribute Rs 150 crore towards the share capital of LPCC. This amount would be in proportion to their Asset Under Management (AUM) of open-ended debt oriented mutual fund schemes managed by them.
However, the schemes such as overnight, gilt fund, and gilt fund with 10-year constant duration but including conservative hybrid schemes would be excluded. Further, the contribution will be based on the average AUM of debt-oriented schemes as detailed for the financial year 2019-20.
In this regard, the Association of Mutual Funds in India (AMFI) is expected to calculate contribution per AMC based on the average AUM of mentioned schemes for 2019-20 and inform all AMCs.
Further, the AMCs are also required to ensure that their net worth should be maintained over and above the contribution made towards setting up such a clearing corporation.