The Finance Ministry makes it clear that the maturity of all permanent bonds should be considered 100 years from the date of issue for the purpose of valuation.
The finance ministry has asked market regulator Sebi to withdraw its directive to mutual fund houses to treat additional Tier I (AT-1) bonds with a maturity of 100 years as it could affect the market and raise capital by banks Can affect. SEBI had earlier this week issued regulations stipulating a 10% limit for cumulative investment by MFs in Tier I and Tier II bonds. PTI
It also clarified that the maturity of all permanent bonds should be considered 100 years from the date of issue for the purpose of valuation.
With the new limits, the incremental capacity of mutual funds (MFs) to buy bank bonds will be disrupted and will result in an increase in coupon rates, the Financial Services Department said in an office memorandum dated March 11 to Sebi chairman and secretary. economic Affairs.
The memorandum states that keeping in view the capital needs of banks and the need for an equal source from the capital market, it has been requested that the revised price norms treat all permanent bonds as having withdrawn the 100-year tenure should go.
The clause on valuation is obstructive in nature and directs that the risk of such instruments in the MF portfolio can be reduced as the fund house has sufficient headroom even within 10 per cent ceiling.
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