Blessings In Disguise For Banking Sector

At the fag end of June 2019, the Securities and Exchange Board of India (Sebi) carried out a surgical strike on the liquid mutual funds, suggesting sweeping changes in their investment norms with respect to debt papers. Commenting on the act, Sebi chairperson Ajay Tyagi said, “Mutual funds investment is different from bank lending and it needs to have elements of safety  as well as investment.” Sebi stated, liquid funds can invest a maximum of 20 per cent of their assets in a single sector as against the current cap of 25 per cent, and must keep aside at least a fifth of their assets in cash equivalent to meet sudden redemption pressures. Liquid funds are debt mutual funds that can invest in securities up to a maturity of 91 days. These changes were based on recommendations made by the mutual fund advisory committee constituted by Sebi to limit liquid fund exposure to a...