Nippon India MF shows concern about the RBI proposal

To begin with, Nippon India MF shows concern to the RBI proposal to write-down the perpetual bonds issued by YES Bank. So then, this came up as an unprecedented and expressed concern about its implications on investors. Besides, the fund house has an exposure of over Rs 1,800 crores to YES Bank debt. And it has created segregated portfolios in its schemes. 

However, YES Bank remained put under a moratorium, with the RBI capping deposit withdrawals at Rs 50,000 per account for a month. Simultaneously, the fund house via its debenture trustee has also moved the Bombay High Court. 

Reportedly, perpetual bonds play an important part in many bank’s capital structures. Also, investors prefer the same such as individual, retail, and high net worth individuals. And various financial institutions namely, mutual funds, insurance companies, and provident funds. 

Nippon India MF stated it made the YES Bank investment in 2016 and 2017. Significantly, it stood as then top five private sector banks and a Nifty company with assets of over Rs 2.1 lakh crore. Also, it has a deposit beyond Rs 1.4 lakh crores. 

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Furthermore, it stated that the financial position of the bank had remained deteriorating in the recent past. Also, the bank’s attempts to raise capital have not come up successful. So then, this has triggered the invocation of bond covenants by investors and the withdrawal of deposits.