SEBI, the Securities and Exchange Board of India is a regulatory body for the securities and commodity market in the country has asked mutual funds to name all debt schemes with regards to potential risk class matrix, based on maximum interest rate risk which is measured by Macaulay Duration (MD) of the scheme and maximum credit risk which is measured by Credit Risk Value (CRV) of the scheme.
To promote this, a display table will be made compulsory from December 1st, 2021 mentioned by the Securities and Exchange Board of India (SEBI) in a circular that has been issued. This was recommended by the Mutual Fund Advisory Committee (MFAC) and after many discussions with the mutual fund industry, SEBI has come to this arrangement.
SEBI has also mentioned that assessment management companies will have complete command and can choose to place single or multiple schemes in any cell of the Potential Risk Class matrix. Each scheme will be placed in one of the nine cells chosen by the regulator to ensure a smooth transition to the new framework. However, they will still retain their pre-existing scheme category under ‘Categorisation and Rationalisation of Mutual Fund Schemes’. This system will render relevant information to investors and help them make an informed judgment about the risks involved. To make things even easier, the changing phase of the risk of each scheme will be separately reflected in the Risk-o-Meter of the scheme, which will be published every month.
