CIRCULAR
SEBI/HO/IMD/PoD2/P/CIR/2025/92 June 26, 2025
To
All Mutual Funds (MFs)
Asset Management Companies (AMCs)
All Trustee Companies/ Board of Trustees of Mutual Funds
Association of Mutual Funds in India (AMFI)
Sir / Madam,
Subject: Timelines for rebalancing of portfolios of mutual fund schemes in
cases of all passive breaches
1. SEBI vide paragraph 2.9 of the “Master Circular for Mutual Funds” (“the Master
Circular”) provided the timelines for rebalancing of portfolios of mutual fund
schemes in the event of deviation from mandated asset allocation mentioned in the
Scheme Information Document (SID) due to passive breaches (occurrence of
instances not arising out of omission and commission of AMCs).
2. The SEBI (Mutual Funds) Regulations, 1996 (“the MF Regulations”) and circulars
issued thereunder prescribe various prudential limits inter alia including issuer
limits, group limits and sector limits etc. While active breaches of those limits are
treated as clear violations of concerned SEBI MF Regulations/circulars issued
thereunder and suitable actions are taken, passive breaches of these limits do
occur due to various reasons such as corporate action, substantial rise/ fall in the
price of an underlying scrip, maturity of any underlying security, large redemptions,
etc., which may not be out of omission and commission of AMCs.
3. In view of the above and based on the recommendation of Mutual Funds Advisory
Committee (MFAC), it is clarified that:
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3.1. The provisions prescribed under paragraph 2.9 of the Master Circular shall be
applicable for all types of passive breaches for the actively managed mutual
fund schemes.
4. This circular is issued in exercise of powers conferred under Section 11(1) of the
Securities and Exchange Board of India Act, 1992, read with Regulation 77 of SEBI
(Mutual Funds) Regulations, 1996, to protect the interests of investors in securities
and to promote the development of, and to regulate the securities market.
Yours faithfully,
Lakshaya Chawla
Deputy General Manager
+91-22-26449369
lakshayac@sebi.gov.in
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