Fund managers calm on IDBI downgrade

Bonds are a govt-backed bank, chance of default is next to impossible, says an income fund head

Despite downgrades by three rating agencies on IDBI Bank’s additional tier-1 bonds (AT-1) this week, fund managers are not distressed. Collectively, fund houses have an exposure of nearly Rs7,500 crore to these papers.

They say it’s only a downgrade and does not necessary mean default. “The schemes’ net asset value (NAV) had taken the hit early this week but got averaged out, thanks to diverse holdings,” said a senior debt fund head.

Some of the big houses which are exposed to IDBI’s AT-1 bonds are UTI Mutual Fund, HDFC MF, Kotak Mahindra MF, Birla Sun Life MF and Reliance MF.

“The