Investment by Mutual Fund Schemes and AMCs in units of Corporate Debt Market Development Fund
Summary
This circular mandates the creation of a Corporate Debt Market Development Fund (CDMDF) to enhance liquidity in the corporate debt market during times of stress. It requires specified debt-oriented Mutual Fund schemes and Asset Management Companies to make mandatory contributions based on their Assets Under Management. The fund acts as a backstop facility to purchase investment-grade corporate debt securities from mutual funds when triggered by SEBI.
Text
The Working Group recommended creation of an entity to buy corporate debt securities from MF schemes with support from Government of India.
Regulations inserted to facilitate constitution of Corporate Debt Market Development Fund (“CDMDF” or “the fund”), as a backstop facility for purchase of investment grade corporate debt securities.
CDMDF shall be launched as a close ended scheme with an initial tenure of 15 years (extendable) from the date of its initial closing.
Units of CDMDF shall be subscribed by AMCs and specified debt-oriented MF Schemes. Contribution... shall be locked-in till winding up of the Fund.
Specified debt-oriented MF Schemes shall invest 25 bps of their Assets Under Management (AUM) in the units of CDMDF.
AMCs shall make a one-time contribution equivalent to 2 bps of the AUM of specified debt-oriented MF Schemes managed by them.
The initial contribution, as mandated above shall be based on AUM of the specified MF schemes as on December 31, 2022.
AMFI shall calculate and inform contribution... Initial contribution shall be made within 10 working days of request from CDMDF.
In case of delay in contribution... respective AMCs shall be liable to pay interest at fifteen percent (15%) per annum for the period of delay.
In times of market dislocation, CDMDF shall purchase listed corporate debt securities from the specified debt-oriented MF schemes.
Securities purchased by CDMDF would be from secondary market, having investment grade credit rating and residual maturity not exceeding 5 years.
The sellers of debt securities shall be paid 90% of the consideration in cash and 10% in terms of units of CDMDF.
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Source: SecMarx — Investment by Mutual Fund Schemes and AMCs in units of Corporate Debt Market Development Fund. Verbatim text is public record; SecMarx structuring (linkage to applying orders) is cited to us.