RBI's move to take control of YES Bank puts Mutual Funds on the edge

As many as 32 mutual fund schemes have exposure to bank's AT-1 bonds

The Reserve Bank of India’s (RBI) decision to takeover YES Bank has put mutual funds (MFs) in lurch, which are bracing for sharp mark-to-market hits on their exposure to the additional tier-I (AT-1) bonds of YES Bank. These bonds carry higher risks compared to other debt securities.

As many as 32 MF schemes are exposed to YES Bank debt with total exposure of close to Rs 2,800 crore (as of January 31, 2020 data).

According to industry participants, MFs are expecting rating downgrades and repricing of the bonds given the higher risks linked with the AT-1 bonds.

“Valuation agencies have