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Guidelines for LPCC by AMCs—By SEBI

Published on February 04, 2021
Current Context: The capital markets regulator organisation, SEBI (Securities and Exchange Board of India) has released the guidelines to form Limited Purpose Clearing
Guidelines for LPCC by AMCs—By SEBI
Corporation(LPCC) by Asset Management Companies (AMCs) of Mutual Funds (MFs).
  • The guidelines illustrate that AMCs are supposed to contribute Rs 150 crore towards the share capital of LPCC.
  • The LPCC is an entity which undertakes the activity of clearing and settlement of repo transactions.
  • As per the circular from SEBI, it states that ‘AMCs willcontribute Rs 150 crore towards share capital of LPCC in proportion to the asset under management (AUM) of open-ended debt oriented mutual fund schemes (excluding overnight, gilt fund and gilt fund with 10-year constant duration but including conservative hybrid schemes) managed by them’.
  • The contribution will be based on average AUM of debt oriented schemes for the FY 2019-20.
  • The contribution will be calculated by the Association of Mutual Funds in India (AMFI).
  • AMFI will calculate the contribution per AMC by considering the average AUM of debt oriented schemes.
  • The AMCs are supposed to ensure networth to be maintained over and above the contribution, which is prescribed under SEBI’s Regulation 21(f), 1966.
  • Static Part: 
    • HQ of SEBI: Mumbai
    • Chairman of SEBI: Ajay Tyagi

Question: 

Q.1 Which organisation released the guidelines to form Limited Purpose Clearing Corporation (LPCC) by Asset Management Companies (AMCs) of Mutual Funds (MFs), which states that AMCs are supposed to contribute Rs _____ towards the share capital of LPCC?
a. NITI Aayog, Rs 100 crore
b. RBI, Rs 150 crore
c. SEBI, Rs 150 crore
d. NABARD, Rs 100 crore
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