Redemptions under credit risk funds down by 81.5 pc: Amfi

Industry body Amfi on Sunday said net redemptions under credit risk funds have plunged by over 81 per cent after the Reserve Bank of India's (RBI) announcement of special liquidity measure of Rs 50,000 for the mutual funds space.

Credit risk funds is one of the debt mutual fund scheme categories and constitute less than 5 per cent of the total debt mutual fund assets under management (AUM).

In a statement, the Association of Mutual Funds in India (Amfi) said net redemptions under credit risk funds stood at Rs 2,949.49 crore as on April 24, and peaked at Rs 4,294.36 crore as on April 27.

Thereafter, for the past three days -- on April 28, April 29, April 30 -- the net redemptions under credit risk funds stood at Rs 1,847.29 crore, Rs 1,251.17 crore and Rs 793.99 crore, respectively, it added.

There is an 81.5 per cent drop in net redemptions in the credit risk funds category on April 30 from the peak net redemptions as on April 27 due to measures announced by the RBI.

All mutual funds have met the redemptions in the normal course of business.

Credit risk funds take additional risk to generate additional return as such funds invest in high-risk and lower-rated paper.

"Declining trend in net redemptions from credit risk funds is a welcome development, indicative of investors' comfort from the RBI's special liquidity facility available to the MF industry," Amfi Chairman Nilesh Shah said.

He, further, said the industry body will continue to work with regulators for normal functioning of the market.

With a view to easing liquidity pressures on MFs, the RBI on April 27 decided to open a special liquidity facility for mutual funds of Rs 50,000 crore.

The announcement came after Franklin Templeton Mutual Fund, which has been operating in India for 25 years, decided to shut down its six schemes citing redemption pressures and lack of liquidity in the bond markets.