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  • MAY 6, 2000

Now MFs can invest in mortgage-backed securities

The Securities & Exchange Board of India (SEBI) has given the green signal to mutual funds for investments in mortgage backed securities.

Investments in securitised financial products has been one of the long-standing demands of the mutual fund industry, and SEBI seems to be convinced about its effectiveness on the back of AMFI's (Association of Mutual Funds of India) recommendations. SEBI approved the amendment in March this year and has now effected the amendment in the Mutual Funds Regulations Act 1996.

Mortgage-backed securities has twin benefits. For one it will open up an additional investment avenue for the mutual fund industry. More importantly housing companies can access additional funds by way for securitisation. Fund managers of income schemes will look at mortgage-backed securities along with bonds, debentures and money-market instruments. Some existing mutual funds and newer ones (like HDFC) may even explore floating specific funds investing purely in mortgage-backed securities.

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