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Business EconomyPosted at: Jun 29 2017 4:04PM


MARKET-MF-TYAGI

Sebi chief cautions MFs against letting debt funds bulge
Mumbai, Jun 29 (UNI) Market regulator Securities and Exchange Board of India (Sebi) chairman Ajay Tyagi today cautioned mutual fund (MF) players against adding bad assets in their portfolios while investing in fixed-income securities.
''Another issue is that there have been instances of defaults in debt portfolios of mutual funds. Mutual funds need to strengthen their own due diligence and evaluation mechanism and not depend only on credit rating agencies. In terms of practice, one should be more careful. Care should be taken that NPAs (non-performing assets) do
not get shifted to mutual fund portfolios by way of transfer of debt. Fund managers need to be watchful and responsive, ''said Tyagi at a mutual fund summit organized by mutual fund industry lobby Association of Mutual Funds in India (Amfi).
''Care should be taken that non-performing assets (NPAs) do not get shifted to MF portfolio by way of debt transfer,'' he said.
He also asked fund houses to improve the due diligence mechanism and to reduce their dependence on credit rating agencies for the same.
''There are instances of default on debt portfolio, so naturally MFs need to strengthen their due diligence and evaluation mechanisms, and not only depend on credit rating agencies,'' he said.
The SEBI chief also called for consolidation saying over 40 fund houses are selling more than 2,000 products.
As many as 45 funds are running 2,000 schemes. There needs to be some consolidation, Tyagi said.
As bad loans in the banking system crossed Rs. 8 trillion, the government and RBI have worked out an insolvency mechanism under which the 12 largest bad loans have been referred to NCLT for
liquidation proceedings.
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