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MFs see little risk in PNB debt papers

By: |
Mumbai | Published: February 23, 2018 4:35:34 AM

Despite holding debt papers worth over Rs 3,200 crore of the Punjab National Bank (PNB), mutual fund houses are confident that there would be minimal impact even if there is a rating downgrade of the bank.

Punjab National Bank, mutual funds, HDFC MF, UTI MF, Aditya Birla Sun Life, Franklin Templeton, Value ResearchMails sent to several fund houses on the subject did not elicit any response, while some suggested that they would not speak on any single security in their portfolio.

Despite holding debt papers worth over Rs 3,200 crore of the Punjab National Bank (PNB), mutual fund houses are confident that there would be minimal impact even if there is a rating downgrade of the bank. Rating agencies like Moody’s, Fitch and Crisil have placed the bank under rating watch, a kind of scrutiny before a possible rating revision. This followed reports of PNB being embroiled in a near Rs 11,400 crore fraud. According to data shared with FE by mutual fund research and ratings agency, Value Research, on January 31, mutual fund houses collectively held bonds, certificates of deposits (CDs) and zero coupon bonds of PNB worth Rs 3,252 crore. Top fund houses such as HDFC MF, UTI MF, Aditya Birla Sun Life and Franklin Templeton have invested in these securities.

Mails sent to several fund houses on the subject did not elicit any response, while some suggested that they would not speak on any single security in their portfolio. However, on condition of anonymity, a fund manager from a leading fund house said, “This was an unexpected news and we are in touch with the management of the bank. However, with PNB being a public sector bank, we don’t expect it to default on payment, so as of now we will continue with our investments. Also, we have never seen a PSU bank defaulting on payment in the past, we expect that they will honour the payment on maturity.”

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