Catch 22: Depositors’ Dilemma with Mutual Funds

Mutual Fund investments are subject to market risk, read the offer document before investing. A very familiar disclaimer, it appears at the end of every advertisement of mutual funds (MF) that we come across on a daily basis. This statement was apt for investors who always chose to invest in equity MFs. However, now looking at the events that unfolded during April 2019, this disclaimer seems to be befitting Debt MFs too. Trouble started brewing in the MF sector since April with six fund houses having exposure to the troubled debt papers issued by the Essel Group and IL&FS companies, waiting to take a call on how to handle the redemption of fixed maturity plans (FMP) in the next three months. These fund houses may either withhold returns or offer  investors an option to roll over  their investments. Unlike Kotak Mutual Fund, which withheld the returns of its close-ended FMP...