Mutual funds’ exposure to NBFCs at Rs 2,48,599 crore as on Aug 31, says fin min

Mutual funds held around Rs 2,48,599 crore worth of debt papers issued by NBFCs as on August 31, 2018. The data was shared recently by Ministry of Finance in the Sixteenth session of Lok Sabha on December 21.

These debt papers included commercial papers and corporate debentures. Mutual Funds' exposure to NBFCs has more than doubled from Rs 98,739 crore as on August 31, 2014, the data showed.

The data further shows that the exposure of debt mutual fund schemes to commercial papers (CP) and corporate debt (CD) issued by NBFCs has gone up from 12.90 per cent in August, 2014 to 16.85 per cent in August, 2018. The details are as follows:

	As on August 31, 2014 (Rs crore)	As on August 31, 2018 (Rs crore)
Exposure of MF to CP issued by NBFC	54,857	1,44,221
Exposure of MF to corporate debt issued by NBFC	43,882	1,04,378
Total exposure of MF to CP nd corporate debt issued by NBFC	98,739	2,48,599
Total exposure of MF to debt instruments	7,65,416	14,75,056
% exposure of debt mutual funds to CPs and corporate debt issued by NBFCs	12.90%	16.85%

Source: LokSabha

The exposure to papers issued by NBFCs became a source of concern for many investors after IL&FS defaulted on a few payments and failed to service its commercial papers (CP) on due date. This has triggered liquidity crisis in the entire NBFC space.

At present, the IL&FS group is straddled with a debt of Rs 91,000 crore.

On September 8, 2018, ICRA revised the short-term rating for the commercial papers of IL&FS and IFIN to ICRA A4 from ICRA A1+. On September 17 evening, ICRA further downgraded the CPs of IL&FS Financial Services (ILFS-FS) to 'D' from 'A4'. Corporate bonds and long-term loans of IL&FS were downgraded to BB from AA+, a drop of 9 notches.

This adversely affected the NAV of funds that had a high exposure to IL&FS debt. On September 10, 2018, the NAVs of a few liquid funds and ultra short duration funds fell by over 1 per cent. The nightmare did not stop there. Over the next few weeks, NAVs of these funds fell further, dropping nearly 5 per cent in a day.