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New limit on bond investment by SEBI

Published on April 30, 2024
Current Context: The Securities and Exchange Board of India (SEBI) has recently made several changes to make the bond market more accessible:
New limit on bond investment by SEBI
  • Corporate Bond Market: SEBI has decided to cut the face value of corporate debt securities to Rs 10,000 from Rs 1 lakh. This move is aimed at enhancing the participation of retail investors in the corporate bond market. The reduction in face value makes bond investments much more attractive and accessible to a wider range of retail investors.
  • Investment Rule for Passive Funds: Traditionally, all mutual funds, including passive funds, were restricted from investing more than 25 per cent of their assets in companies belonging to the same group as the fund manager (called the sponsor group). This rule aimed to prevent conflicts of interest and ensure diversification within mutual funds.
  • Investment Limit for NRIs: SEBI has allowed up to 100% higher participation by non-resident Indians (NRIs) in IFSC-based FPIs.
  • These changes are expected to increase accessibility, enable portfolio diversification, and potentially lead to a more vibrant and dynamic bond market in India.

Question:

Q.1 What change has SEBI made to the face value of corporate debt securities?
a. Increased it to Rs 1 lakh
b. Decreased it to Rs 10,000
c. No change
d. Increased it to Rs 10,000
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