Sebi allows debt mutual funds to invest up to 35% in housing finance companies

Market regulator Securities and Exchange Board of India (Sebi) has relaxed exposure norms for debt mutual funds allowing them to invest an additional 10 per cent in housing finance companies.

Sebi had earlier allowed a 5-per cent additional limit for housing finance companies

Sebi said debt mutual funds can now invest an additional 10-per cent in housing finance companies over and above the 25 per cent sectoral limit.

Debt funds can now invest an overall 35 per cent of their total investible funds in housing finance companies, thus boosting availability of funds to the low-cost housing sector.

"Mutual Funds/AMCs shall ensure that:

• Total exposure of debt schemes of mutual funds in a particular sector (excluding investments in bank CDs, CBLO, G-Secs, TBills, short term deposits of Scheduled Commercial Banks and AAA rated securities issued by Public Financial Institutions and Public Sector Banks) shall not exceed 25 per cent of the net assets of the scheme;
• Provided that an additional exposure to financial services sector (over and above the limit of 25 per cent) not exceeding 10 per cent of the net assets of the scheme shall be allowed only by way of increase in exposure to housing finance companies (HFCs);
• Provided further that the additional exposure to such securities issued by HFCs are rated AA and above and these HFCs are registered with National Housing Bank (NHB) and the total investment/ exposure in HFCs shall not exceed 25 per cent of the net assets of the scheme.

Sebi has directed mutual funds to make appropriate disclosures in scheme information.