Debt MF schemes doing well in stress tests: RBI financial stability report

The central bank says stress tests show risks faced by debt schemes is within limits

Stress tests of open-ended debt mutual fund schemes show that the interest, credit and liquidity risks faced by them are well within prescribed limits, the Reserve Bank of India (RBI) said on Thursday.

"Stress tests for open-ended debt mutual funds showed no breach in limits pertaining to interest rate, credit and liquidity risks," the central bank's latest financial stability report stated.

The RBI's report is based on stress tests conducted by the top 10 fund houses in the months of March and September 2022.

In a bid to strengthen risk management practices at fund houses, the Securities and Exchange Board of India (Sebi) has mandated  all open-ended debt schemes (except overnight schemes) to conduct stress tests as per the best practice guidelines of the Association of Mutual Funds in India (AMFI).

The stress testing happens every month to evaluate the impact of various risk parameters — interest rate, credit, liquidity and redemptions — on the net asset values (NAV) of the schemes.