InvestorQ : Does the moratorium on EMIs also apply to bonds and CPs that mutual funds have invested in? That should be a big relief for the debt fund holders?
Juvina Maggie made post

Does the moratorium on EMIs also apply to bonds and CPs that mutual funds have invested in? That should be a big relief for the debt fund holders?

Answer
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Angel dcosta answered.
6 months ago


This is an interesting situation for mutual funds and mutual fund investors. MFs have asked for a 3-month moratorium on their debt investments maturing between Apr-20 and Jun-20 as for retail investors. However, SEBI has been wary considering that nearly Rs.150,000 crore of CPs and bonds are coming up for repayment by Indian companies and many of them could be on the verge of default. Many issuers had approached SEBI seeking approval for extending the maturity of the paper after India entered a 21-day lockdown. It has been reported by Prime Database that corporate bonds worth Rs.91,902 crore and commercial papers worth Rs.77,797 crore will mature before of May 31, 2020. RBI has allowed banks to grant this moratorium but SEBI has problems with this move considering that mutual funds are major investors in these instruments. Clearly, SEBI wants mutual funds that bought these papers to handle any default or delay in repayment based on prescribed fair valuation policies. According to SEBI, granting a moratorium will pose an issue for mutual funds as these schemes have a fixed maturity and they have to repay the investors. Also, SEBI has clarified that the primary accountability of the mutual funds is towards the unit holders and not the issuers.