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The Association of Mutual Funds in India (Amfi), in a board meeting on Friday, decided on a response on behalf of all members to State Bank of India (SBI’s) letter to some fund houses for a compensation policy in case of a default.
Sources said the response will be made by Amfi's committee on valuation, headed by DSP BlackRock MF's president, Sundaresan Naganath.
In a six-point questionnaire, SBI, the country's largest lender, had asked fund houses about methods to deal with suspension of rating of an investment and on client compensation policy in the event of a default, among other queries. This came in the wake of the Amtek Auto crisis, involving two of JPMorgan (India) AMC's schemes.
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The State Bank of India questions took many fund houses by surprise. Senior MF officials expressed surprise over the one on ‘compensation policy’, terming it 'impractical'.
SBI’s questionnaire sought details on exposure to commercial paper and measures to deal with suspension of rating. It has also asked for the maximum exposure fund houses take to a single group or scrip. And, exposure to brokerage-promoted papers of non-bank finance companies.
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The country’s largest lender invests about Rs 10,000 crore in MFs' short-term and liquid funds. Out this, Rs 6,200 crore is invested in its own fund house, SBI MF.
As on end-September, the assets under management in the liquid & money and market segment stood at Rs 1.78 lakh crore, about 15 per cent of the sector's total asset size of Rs 11.87 lakh crore.
