As many as 32 schemes across 11 fund-houses as on January 31 had debt exposure to the ailing private sector that has been placed under moratorium now
The debt mutual fund space continues to offer sharp twists and turns. Debt mutual funds’ exposure of Rs 2,848 crore worth Yes Bank bonds have come under the spotlight, amid the private sector bank now being placed under moratorium that restricts payments above Rs 50,000 crore till April 3, 2020.
These bring back the painful memories of the IL&FS saga that was witnessed in September 2018 when the infra lender went belly up and the government had to take over that company. Debt mutual funds faced interest payment issues due to various restrictions. The same story happened in the case of DHFL (Dewan Housing) matter as well.
The Reserve Bank of India, in exercise of the powers vested under sub-section (1) of Section 35A of the Banking Regulation Act, 1949 has directed that Yes Bank from 2000 hrs on March 5, 2020, shall not grant or renew any loan or advance, make any investment, incur any liability or agree to disburse any payment, whether in discharge of its liabilities and obligations, or otherwise enter into any compromise or agreement, or shall transfer or otherwise dispose of any of its properties or assets. Even when it comes to disbursement to depositors and creditors, the Rs 50,000 cap condition has to be met to the extent permitted by the order of moratorium dated dated March 5, 2020. If the banking company desires to incur any other expenditure on account of emergency during the currency of these directions, it has to take special permission from the Reserve Bank of India.
As on January 31, 2020, as many as 32 schemes across 11 AMCs had exposure in Yes Bank debt. The 11 AMCs are Aditya Birla Sun Life, Baroda, Franklin Templeton, IDBI, Kotak, L&T, Mahindra, Nippon India, PGIM India, Sundaram and UTI.
In value terms, Nippon India Mutual Fund schemes has the highest Yes Bank debt exposure at Rs 1806.2 crore. In terms of % of AUM (assets under management), Nippon India Strategic Debt has the highest exposure of 21.25%, followed by Nippon India Credit Risk (10.96%), Nippon India Equity Hybrid (8.11%), Nippon India Hybrid Bond (8.06%) etc. In total, six schemes of Nippon India had Yes Bank debt exposure.
Franklin Templeton in next in line with Rs 475 crore exposure (as per market value). It has exposure across four schemes ranging from 1.4-2.7% of AUM. UTI MF is 3rd with over six schemes. UTI Credit Risk is maximum exposed as % of AUM at 6.38%.
Kotak Mahindra Mutual Fund (Rs 93.8 crore), Baroda Mutual Fund (Rs 53.6 crore), PGIM India Mutual Fund (Rs 21.9 crore), Aditya Birla Sun Life Mutual Fund (Rs 9 crore), Sundaram Mutual Fund (Rs 8.1 crore), IDBI Mutual Fund (Rs 7.2 crore), L&T Mutual Fund (Rs 5 crore) and Mahindra Mutual Fund (Rs 1.6 crore) have moderate to minimal exposure in value terms. In this lot, the Yes Bank debt exposure terms of % of scheme AUM was highest in Baroda Treasury Advantage Fund at 26.87%, followed by IDBI Credit Risk Fund (12.09%), PGIM Credit Risk Fund (6.20%) etc.
Take a look at the table below for fund-house wise Yes Bank debt exposure.
|Fund House||Scheme names||Exposure in Rs cr|
|Nippon India Mutual Fund||Nippon India Credit Risk, Nippon India Equity Hybrid, Nippon India Equity Savings, Nippon India Hybrid Bond, Nippon India Retirement (Wealth), Nippon India Strategic Debt||1806.2|
|Franklin Templeton Mutual Fund||Franklin India Credit Risk, Franklin India Debt Hybrid, Franklin India Dynamic Accrual and Franklin India ST Income||475.7|
|UTI Mutual Fund||UTI CCF – Savings Plan, UTI Credit Risk, UTI Hybrid Equity, UTI Medium Term Fund (Segregated – 17022020), UTI Medium Term,
UTI Regular Savings Fund (Segregated – 17022020), UTI Regular Savings, UTI ULIP
|Kotak Mahindra Mutual Fund||Kotak Credit Risk, Kotak Medium Term||93.8|
|Baroda Mutual Fund||Baroda Credit Risk, Baroda Dynamic Equity, Baroda Equity Savings, Baroda Hybrid Equity, Baroda Treasury Advantage||53.6|
|PGIM India Mutual Fund||PGIM India Credit Risk||21.9|
|Aditya Birla Sun Life Mutual Fund||Aditya Birla SL Regular Savings||9|
|Sundaram Mutual Fund||Sundaram Equity Hybrid, Sundaram Medium Term Bond||8.1|
|IDBI Mutual Fund||IDBI Credit Risk||7.2|
|L&T Mutual Fund||L&T Resurgent India Bond||5|
|Mahindra Mutual Fund||Mahindra Credit Risk Yojana||1.6|
The Indian government okayed the Reserve Bank’s proposal to place Yes Bank under moratorium from 18:00 hrs on March 5, 2020 up to and inclusive of April 3, 2020. This in effect means Yes Bank cannot, without the permission in writing of the RBI, make aggregate payment to a depositor over Rs 50,000 even if there is more money lying to his/her credit, in any savings, current or any other deposit account.
In terms of Yes Bank stocks, 73 funds had exposure as on January 31, 2020. But these numbers may be much lower given that it is over a month old and funds are known to pare Yes Bank stock exposure. Since Yes Bank is part of indices like Nifty50 and Sensex Next 50, many index funds and ETFs were forced to keep the stock in their portfolio. The NSE had said Yes Bank will cease to be a part of Nifty50 index from March 27, and will be replaced by Shree Cement.
As many as six equity schemes including DSP Equal Nifty 50, ICICI Pru Pvt Banks ETF, Tata Nifty Pvt bank ETF, UTI S&P BSE Sensex Next 50, Nippon India ETF Sensex Next 50 and SBI ETF Sensex Next 50 had more than 1% of AUM in yes Bank shares as on January 31, 2020.
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