Funds In A Spot Over Backdating Requests

Corporates and institutions are coaxing mutual funds to allow them to invest fresh funds in debt and gilt schemes at historical net asset values prior to the Union Budget, by backdating transactions. The repo rate cut from 5.5 per cent to 5 per cent by the Reserve Bank of India on the day of the Budget lead to a steep appreciation in the net asset values of debt and gilt schemes.

Though the industry is aware of such a development, no fund manager is willing to go on record for obvious reasons.

According to some fund managers, while smaller funds are succumbing to the pressure from bulk investors, larger funds are resisting the temptation despite having good corporates and institutions as their clients. Krishnamurthy Vijayan, chief executive officer of J M Mutual Fund, said he was aware of such a development in the sector.

 

According to him, such a step would mean that funds will have to forfeit the appreciation in their net asset values.