The Securities and Exchange Board of India (Sebi) on Friday came out with a circular on risk management framework for liquid and overnight funds and norms governing investment in short-term deposits. Sebi said a liquid fund shall hold at least 20% of its net assets in liquid assets. Also, liquid funds and overnight funds shall not park funds in short-term deposits of scheduled commercial banks, which are pending deployment.
The Sebi circular said, “Liquid assets shall include cash, government securities, T-bills and repo on government securities. In case, the exposure in such liquid assets falls below 20% of net assets of the scheme, the asset management company (AMC) shall ensure compliance with the above requirement before making any further investments.” This provision will come into effect from April 1, 2020.