MUMBAI (Reuters) - Indian mutual funds need to improve their due diligence before investing in corporate bonds and not rely only on credit ratings given rising concerns about potential defaults, the chairman of Securities and Exchange Board of India (SEBI) said on Thursday.
The warning by SEBI Chairman Ajay Tyagi comes as several companies, including Amtek Auto, Jindal Steel and Power Ltd, Ballarpur Industries, have defaulted on their debt coupon payments over the past few years.
“Mutual funds need to further strengthen their own due diligence and evaluation mechanism and not only depend on credit rating agencies,” Tyagi said in a speech at a mutual funds conference.
Tyagi also said large institutional investors needed to be more “actively involved” in monitoring corporate governance at companies, an issue in the limelight after tussles between Tata Group and ousted Chairman Cyrus Mistry.
Management at Infosys Ltd has also engaged in a public spat with founders over a range of issues, including remuneration for executives.
Tyagi also reiterated the need for asset managers to consolidate schemes saying the launch of too many funds was creating confusing.
Reporting by Abhirup Roy and Samantha Kareen Nair; Writing by Suvashree Dey Choudhury; Editing by Rafael Nam