SEBI has modified valuation norms for debt instruments held by fund houses. In a recent circular, the market regulator has asked valuation agencies to differentiate between a usual default and default by the issuer due to the nationwide lockdown and the three-month loan moratorium/deferment on payment permitted by the RBI.
“Based on assessment, if the valuation agencies appointed by AMFI are of the view that the delay in payment of interest/principal or extension of maturity of a security by the issuer has arisen solely due to COVID-19 pandemic lockdown and/or in light of the moratorium permitted by RBI creating temporary operational challenges in servicing debt, then valuation agencies may not consider the same as a default for the purpose of valuation of money market or debt securities held by MFs,” the circular noted.
Further, the regulator said that if there is any difference in the valuation of securities provided by two valuation agencies, the conservative valuation shall be accepted. The relaxation in terms of valuation will be in force till the period of moratorium by the RBI.
