Sebi on Tuesday clarified that the grandfathering of the existing unlisted non-convertible debentures (NCDs) is applicable across the mutual fund industry and said the mutual funds can transact in such NCDs.

However, investments in such NCDs will continue to be subject to compliance with investment due diligence and all other applicable investment restrictions, the regulator said in a circular.

“It is ... clarified that the grandfathering of the identified NCDs is applicable across the mutual fund industry.

“Accordingly, mutual funds can transact in such identified NCDs and the criteria as specified in para B (1) of Sebi circular dated October 1, 2019 is not applicable,” Sebi said.

The provision refers to Sebi’s direction issued in October 2019 that a mutual fund scheme shall not invest in unlisted debt instruments.