You may have already heard a lot about SEBI's latest circular on perpetual bonds. In case you missed it, you can read about it here. To provide a quick summary, SEBI has capped mutual-fund investments in perpetual bonds, a riskier variety, to 10 per cent of their AUM. Further, it has mandated that the funds with investments in such bonds will have to ensure enablement of the side-pocketing provision in their scheme information document (SID). Finally, and controversially, it has stated that the maturity of all perpetual bonds for the purpose of valuation should be taken as 100 years from the date of their issuance. This last piece of regulation caused jitters to mutual funds. They anticipated that it would cause a drop in the prices of these perpetual bonds. But the intervention of the Finance Ministry has put these concerns to rest. So, you need not worry. However, if you are keen to get a better perspective on this episode, read on. What's good about the revised rules? As mentioned earlier, perpetual bonds carry higher risk than vanilla debt securities. Even though they earn a higher rate of interest, the bank can write them off completely if it lands into f
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