Moratorium-linked uncertainty puts debt mutual funds in jeopardy

According to Sebi data, MFs had Rs 1.38 trillion debt exposure to NBFCs, of which Rs 51,014 crore was in less than 90-day debt papers, as of March 31, 2020

The moratorium-linked uncertainty over non-banking financial companies (NBFCs) could lead to credit events or rating action on exposures of debt mutual funds (MFs), which hold Rs 51,014 crore of bond exposures to NBFCs in near-term maturities.

According to the data from the Securities and Exchange Board of India (Sebi), MFs had Rs 1.38 trillion debt exposure to NBFCs, of which Rs 51,014 crore was in less than 90-day debt papers, as of March 31, 2020.

“Larger-sized NBFCs, with strong parentage, will be able to tide over the liquidity crunch despite lack of moratorium from banks. However, mid- and small-sized NBFCs