SEBI allows mutual funds to sell government securities

In its efforts to further develop the debt market, SEBI has decided on April 16, 2008 to allow mutual funds to sell government securities contracted for purchase in DVP III mode for government securities market in accordance with the guidelines issued by Reserve Bank of India in this regard.

Under the DVP III mode of settlement, it is possible to sell government securities, already contracted for purchase without taking delivery provided the transaction is guaranteed by an approved central counterparty namely Clearing Corporation of India Ltd (CCIL).

Presently, mutual funds cannot sell such securities contracted for purchase as they are required under SEBI Regulations to take the actual physical delivery of securities. This decision will put mutual funds at par with other market participants like Banks, Primary Dealers and Insurance Companies as they can now go in for the net settlement of government securities transactions.

SEBI Board also approved the participation of mutual funds in ‘when-issued’ (WI) market.



Indian Mutual Funds can now invest $7 bn
overseas Current challenges in the global financial markets
No immediate threat to financial stability in India

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