On 5th March 2020, the Reserve Bank of India (RBI) regulated withdrawals from Yes Bank to just ₹50,000 per person. Yes bank has also been restricted from granting any loans or advances to customers.The move follows a long period of debt troubles for the bank which struggled to raise additional capital. Some debt funds have already written off their Yes Bank exposure and more are likely to follow the suit. There are even several equity funds such as Nippon India Retirement Fund – Wealth Creation Scheme, ICICI Prudential Private Banks ETF, DSP Equal Nifty 50 Fund, etc. with exposure of more than 1% of their Asset UnderManagement (AUM) to Yes bank.
About 32 individual mutual fund schemes are exposed to Yes Bank with a total exposure of around ₹2,848 crores. Let’s address a few questions that may arise due to the Yes Bank crisis and understand if you should continue investing in mutual funds:
Will your mutual fund investments get impacted?
In terms of exposure to Yes Bank at a scheme level, Nippon India Strategic Debt (22.8%), Baroda Treasury Advantage (26.87%), and IDBI Credit Risk (12.09%) funds top the chart. These statistics are as per the month-end filling of mutual fund investments for the month of January 2020. This could have changed if any fund house has flogged its investments.
What should investors do?
There is not much that you can do with your existing investments in the mutual fund schemes holding bonds of Yes Bank since the damage has already been done. Mutual fund experts believe that more clarity will emerge on the resolution plan of Yes Bank in the near future. Thus, investors will get more transparencyabout the future of their disturbed investments.
As the economy has paused due to the uncertainty in the global markets owing to the Corona Virus epidemic, mutual fund investors ought to exercise caution. Experts advise their clients to steerclear of all credit-risk funds and recommend investments in overnight, liquid, and banking & PSU bond funds that invest in short-term papers, till the storm settles.
If your mutual fund account is linked to Yes Bank, switch to a different bank while redeeming units. You can update details of your new bank account online by submitting a copy of a cheque. Or you can do it offline by filling a form.
So, all in all, investors are advised to not to act hastily and monitor the situation closely. A huge markdown is already there. Remember the golden rule of investing – Stay calm and stay invested. You have already incurred a loss and redeeming your investment would only make it eternal. RBI has already started regulating the situation and with the involvement of the Securities and Exchange Board of India (SEBI), things are improbable to get worse. Happy investing!
