Sebi should revisit liability side of MFs

This would be a good time to change the 20-25 rule to 50-5 or 50-10

Mutual funds (MFs) are very competitive anima­ls. So, if I don’t lend to a new company and keep money in overnight instruments, I earn 6.25 per cent. If I lend to a non-banking financial company, I earn 8.50 per cent. The over 200 basis point (bps) difference between overnight and three-month commercial paper is significant…,” Santosh Kamath, managing director and chief investment officer, Franklin Templeton (FT) Mu­tual Fund told a television channel 18 months back.

The 200 bps extra return has come back to bite the fund house. Last Thu­rsday, it shut down six schemes with assets of around Rs 26,000