Mumbai, Apr 16 (UNI) In its efforts to further develop the debt market, the market regulator Securities and Exchange Board of India (SEBI) has decided to allow mutual funds to sell government securities, contracted for purchase in DVP III mode for government securities market, in accordance with the guidelines issued by Reserve Bank of India (RBI) in this regard.

A decision in this regard was taken at the SEBI board meeting held here today.

Under the DVP III mode of settlement, it is possible to sell government securities, already contracted for purchase without taking delivery, provided the transaction is guaranteed by an approved Central counterparty namely Clearing Corporation of India Ltd (CCIL).

Presently, mutual funds cannot sell such securities contracted for purchase as they are required under SEBI Regulations to take the actual physical delivery of securities.

With this decision, mutual funds, along with other market participants like banks, primary dealers and insurance companies, can now go in for the net settlement of government securities transactions.

The Board also approved the participation of mutual funds in 'when-issued' (WI) market. Necessary amendments to SEBI (Mutual Funds) Regulations, 1996 will follow.

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