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Sebi's new norms to discourage promoters from borrowing from MFs, says Kotak Mahindra AMC

Updated : June 28, 2019 11:01 AM IST

Markets regulator Sebi's new norms are likely to discourage promoters from raising funds from mutual fund house, therefore forcing them to rely on non-MF entities like NBFCs and others, said Lakshmi Iyer, CIO-Debt and head-Product, Kotak Mahindra AMC.

“If you look at total debt outstanding and the percentage of loan against shares as a proportion of that total debt, it was not a big amount. Incrementally, one has seen these loan against shares, the debenture book run down with the MF industry. Now with 4-time security cover needed, it will be detrimental for these promoters to borrow from MF and they will have to rely on non-MF entities like NBFCs or others to access this mode of investments," she said in an interview with CNBC-TV18.

The capital markets regulator Sebi on Thursday approved a new framework for issuance of differential voting right (DVR) shares from July and tightened norms for mutual funds and promoters pledge.

The regulator said liquid funds should hold a minimum of 20 percent of assets in cash, G-Secs, T-bills, repo. It slashed the sectoral cap to 20 percent from 25 percent. There should be adequate security cover of at least 4x in credit enhanced instruments linked to equities, the regulator added.
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