NEW DELHI, Oct. 9 -- The shock freezing of six debt schemes of Franklin Templeton Mutual Fund in April this year made a lot of investors wary of the debt market in general. The schemes were frozen as a result of a surge in redemptions in the schemes, which faced liquidity issues as they were unable to sell their holdings to meet the requests. Suddenly, investors became aware of the risk of lack of liquidity in debt mutual funds; the credit crisis had already shook their confidence in the last couple of years.
In order to address this broad investor angst, capital markets regulator Securities and Exchange Board of India (Sebi) is now considering a set of proposals that have the potential to greatly reduce the risk in debt mutual funds and i...