According to an industry-wide analysis by CARE Ratings, a year since the crisis in the non-banking financial companies (NBFC) sector, the overall exposure of mutual funds (MFs) to NBFCs declined by 0.63 lakh crore. At the start of the crisis in July 2018, the total exposure of MFs stood at Rs 2.64 lakh crore. By June 2019 end, this had fallen to Rs 2.02 lakh crore. In percentage terms, the share of NBFC exposure fell from 19 per cent (of the total funds) in July 2018 to 14.8 per cent in June 2019.
As the two graphs show, the fall is much steeper in the exposure of MFs to the commercial paper of NBFCs as against their exposure to the corporate debt of NBFCs. This is understandable since the commercial paper is unsecured, short-term debt instrument, typically used to cover working capital expenses.
Exposure of MFs to the commercial paper of NBFCs has fallen from Rs 1.57 lakh crore to Rs 1.02 lakh crore; that’s a decline from a share of 11.31 per cent (of the total funds) to just 7.45 per cent. MFs’ exposure to the corporate debt of NBFC, on the other hand, has fallen only marginally – from Rs 1.07 lakh crore to Rs 1 lakh crore; a fall from 7.73 per cent share to 7.35 per cent.
On the whole, the Assets under Management of the Indian MF industry grew to Rs. 24.25 lakh crore in the first quarter of the current financial year. When compared with the last quarter of the previous financial year, which ended March 2019, the industry’s size fell by Rs. 1.68 lakh crore. The main hit was sustained by debt MFs, which saw AUMs fall from Rs 13.26 lakh crore to Rs 11.55 lakh crore.