SEBI has asked AMFI to issue guidelines for assessing credit risk of debt instruments. AMFI is likely to issue best practices guidelines on credit assessment practices soon. The decision was taken at a recently held meeting of SEBI Mutual Fund Advisory Committee.
AMFI CEO, C.V.R. Rajendran confirmed this development and said that AMFI has started working on it.
SEBI Chairman UK Sinha had cautioned fund houses on debt fund management and advised them to be careful while investing in debt instruments at the Annual General Meeting (AGM) of AMFI held in September.
Expressing his concern over the recent Amtek Auto episode, he said that fund houses should manage their debt portfolio proactively. He asked fund houses not to rely solely on credit rating agencies but instead develop expertise in assessing companies on their own.
Sinha pointed out that the mutual fund industry had an exposure of Rs.4,000 crore to downgraded paper as on July 2015 which went up to Rs.13,000 crore in August 2015.
In September, SEBI has sent an email to AMC CEOs advising them to reassess their risk management policy related to fixed income schemes.
