Faced with a tight monetary situation, the Reserve Bank of India (RBI) has sought data from the mutual funds on their debt investments. These include investments in certificate of deposits (CDs), pass-through certificates (PTCs) and commercial papers (CPs).
The intention is to check the credit quality of the mutual fund industry. “We have sought information from the mutual funds. These are unusual times,” said an RBI official.
The mutual fund industry has invested around Rs 25,000 to 30,000 crore in the certificate of deposits, issued by banks. According to sources, certificate of deposits, which are among the most liquid of money market instruments, have faced some problems in the recent past. This has resulted in the rolling over of the CDs. PTC, which are mortgaged-backed securities are issued by banks, after creating a pool of their receivables (loans and interest)
Similarly, the industry is also facing rollover pressures from commercial papers issued by real estate companies and non-banking financial institutions. In the past two years, liquid funds and fixed maturity plans were aggressively investing in papers issued by these companies because of higher yields.
“The regulator wants to know the total outstanding of the banking and other sectors in mutual funds. This will give them a better understanding of the liquidity demands in the near future,” said a senior executive of a mutual fund. In the past few months, mutual funds have been aggressively investing in CDs and CPs because the PTC market has become riskier in nature.
The total average assets under management (AAUM) of mutual funds is Rs 529,000 crore in September. Out of this, almost 60 per cent of the money is invested in debt instruments of various maturities. Fixed maturity plans alone account almost one-fifth of the AAUM. Besides FMPs, liquid and liquid plus funds also aggressively invest in these debt instruments.
