Securities and Exchange Board of India (Sebi) may review the existing regulatory framework for liquid schemes, reported Business Standard. The review, as per the report, is the direct result of the crisis triggered by the Infrastructure Leasing & Financial Services (IL&FS) fiasco.
According to the report, Sebi is considering the introduction of new measures to tackle such situations and this will include steps that will aid schemes to manage liquidity and risks better.
Suggestions in this direction include reduction of single investor limit in liquid schemes, restriction of the flow of hot money in to such schemes and directing schemes to have a larger liquidity buffers in tough, the report said.
Currently, regulations state that such funds need to have at least 20 investors and no single investor can account for more than 25 percent of the fund’s corpus, experts feel it is not safe enough as this would mean concentration of corpus in the hands of a few, the report said.
In addition, the report added that Sebi is mulling whether a liquid scheme is the right place for money meant for banks’ intra-day liquidity, as the regulator does not want money chasing arbitrage opportunities to be parked in liquid schemes, the report said.
First Published: IST