A Securities and Exchange Board of India (Sebi) circular issued on Wednesday capped mutual fund (MF) investment in bonds with special features to 10% of scheme assets and 5% for a single issuer. This includes additional tier-1 (AT1) bonds as well as tier-2 bonds issued by banks under Basel III norms.
Sebi has also laid down valuation norms for such bonds, mandating that AT1 bonds should be valued as if they have a maturity of 100 years.