AMFI to finalise NPA norms

NEW DELHI, JAN 3: The Association of Mutual Funds of India (AMFI) has proposed to distinguish between the non-performing assets (NPAs) of...

NEW DELHI, JAN 3: The Association of Mutual Funds of India (AMFI) has proposed to distinguish between the non-performing assets (NPAs) of the open-ended and close-ended schemes of mutual funds.

In case of open-ended schemes, dues which have remained unpaid for one quarter will be treated as NPAs while in case of close-ended and other schemes, NPAs will constitute those dues remaining unpaid for two quarters as per the proposed definition by AMFI, SBI Mutual Fund (SBIMF) managing director Niamatullah said.

Under open-ended schemes an investor can enter as well as exit the scheme any time, while under close-ended schemes an investor can exit only after a pre-specified period or through the secondary market if the scheme is listed.

Niamatullah is heading a committee constituted by AMFI to evolve uniform provisioning norms for NPAs or bad loans of mutual fund schemes. At present the committee is concentrating on debt assets of schemes. He said that in case of equity, assets most of the mutual funds hadtheir own norms which were acceptable by industry standards. The committee has already held two meetings and a third final meeting is to be held early this year.

Apart from SBIMF, the others in the committee are – LIC Mutual Fund, Unit Trust of India, Templeton Mutual Fund, Birla Mutual Fund and ICICI-Prudential. The committee is likely to finalise its recommendations in another two months time. Niamatullah said the proposed definitions were acceptable to most mutual funds.

According to figures released by AMFI, the total assets under the management of 31 mutual funds as on September 30, 1998 were to the tune of Rs 68,000 crore. While industry officials were cagey about revealing the size of NPAs in the mutual fund industry, unofficial estimates put them in the range between Rs 500-600 crore.

"The NPAs have gone up," said a senior official in a public sector mutual fund, "especially in case of debt assets and one can see the trend from the wholesale downgrading of debt instruments recently." The factthat mutual funds still are an attractive investment option for investors is testified by the fact that mutual funds in general grew by 50 per cent in terms of sales with collections to the tune of Rs 6000-plus crore during the period July to September last year.

Story continues below this ad

However, redemptions were higher than normal – up by 86 per cent over the previous year – at more than Rs 5000 crore. The UTI, still the favourite among investors in spite of the difficult year it had in 1998, managed to mobilise nearly Rs 3000 crore from its existing schemes.