Sebi Urges Mutual Fund Industry to Enhance Stress Testing

Markets regulator Sebi has urged the mutual fund industry to conduct proactive stress tests as part of its risk management strategy. This initiative, emphasized by Sebi member Ananth Narayan Gopalakrishnan, aims to address liquidity risks and improve transparency. Additionally, new regulations are proposed to simplify compliance and promote innovation.

Markets regulator Sebi has urged the mutual fund industry to proactively undertake stress tests, an essential aspect of risk management in the financial sector, according to its whole-time member Ananth Narayan Gopalakrishnan.

Addressing a mutual fund event, Gopalakrishnan stressed the importance of modeling stress scenarios for the entire mutual fund ecosystem to better assess and manage liquidity risks, particularly in small and midcap equity schemes.

He emphasized improving risk communication for different schemes and highlighted the significant growth in mutual fund investments, while also proposing new regulations to foster innovation and simplify compliance.