Sebi on Monday tightened its norms for mutual funds’ exposure to riskier corporate bonds including by capping the investment limit in bonds of a single company at 10 per cent in a move to safeguard investors’ interest.

The single sector exposure limit would also be lowered from 30 per cent to 25 per cent, while group-level investment limits of 20-25 per cent have also been introduced for the mutual funds (MFs) investing in debt securities.

The move comes after JP Morgan Mutual Fund got into troubles due to its exposure to debt securities of Amtek Auto, while a few other fund houses have also faced similar problems with regard to corporate bonds of other distressed firms.

The measures will mitigate risks arising on account of high levels of exposure in the wake of events pertaining to credit downgrades and put mutual funds in a better position to handle adverse credit events.

It would also provide mutual fund investors with enhanced diversification benefits, Sebi said. The new norms will reduce sector exposure limits of debt schemes to 25 per cent from 30 per cent.