MUMBAI - India’s market regulator is in talks with industry to deal with fears of contagion effect on mutual funds due to a liquidity crisis faced by the country’s non-banking finance companies (NBFC), its chief said on Friday.

The crunch hit India’s shadow banks in September and October after Infrastructure Leasing and Financial Services (IL&FS) defaulted on a series of debt obligations spreading panic among other NBFCs.

Securities and Exchange Board of India (SEBI) has been scanning India’s mutual funds’ investments in the shadow banking sector since then.

“We are examining, in consultation with the industry, and will gradually take appropriate action,” Ajay Tyagi, chairman of SEBI said in response to a question if changes are needed in mutual fund regulations.

Reporting by Abhirup Roy; Writing by Nidhi Verma; Editing by Sanjeev Miglani

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