MUMBAI: The Securities and Exchange Board of India (Sebi) has doubled the limit on permissible holding of bonds of housing finance companies (HFCs) by mutual funds as it aims to support Prime Minister Modi's promise of housing for all. 

"In light of the role of HFCs, especially in affordable housing space, it has now been decided to increase additional exposure limits provided for HFCs in financial services sector from 5 per cent to 10 per cent," the capital market regulator said in a circular issued on Wednesday. 

Earlier, Sebi put such a cap on sector investment exposures after a few companies including Amtek Auto had defaulted in interest payments, which affected some mutual funds running retail debt schemes. But, it gave a special dispensation to housing finance companies, seen relatively robust segment with better prospect. 

Fund houses could invest 5 per cent in addition to the 25 per cent, which is the regulatory cap for each sector. 

"The revision in limits will enable a reduction in incremental cost of funds by 25-30 basis points," said Gagan Banga, vice chairman, Indiabulls Housing Finance. "We will look to utilise (the cost benefits) to both grow faster and also to pass on the benefit to our customers." 

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