The Prime Minister's Office (PMO) has suggested regulatory and liquidity measures to help mutual funds invest in stressed companies. These include setting up of 'Covid-19 Support Fund' for close-ended debt schemes. Such a scheme does not allow investors to invest or withdraw investments in the middle of the plan period.
The proposed move could provide a lifeline to asset management companies (AMCs), which have been battling a cash crunch for a long time, especially since the IL&FS case. Because of this, Franklin Templeton had to close six debt plans with assets of over Rs 30,000 crore. In a seven-page letter sent to the Department of Economic Affairs and Securities and Exchange Board of India (SEBI) earlier this month, the PMO had asked for appropriate steps for the effective resolution of stressed assets. Apart from this, relaxation in pricing system for companies going into restructuring/liquidation, amendment of side pocketing rules (stripping of stressed assets) to 15 days instead of instant and rights of debenture holders in case of default, etc.
The PMO wrote in the letter, "There is unpredictable uncertainty on the credit quality scenario of the Indian industry due to the deepening of the Covid-19 epidemic and the global recession, which is also showing a slowdown in the economy. This has forced economists to reduce GDP growth for FY 2021. Due to the slowdown in the economy, the financial pressure will also increase, but the improvement in demand can improve the quality of credit.
Addressing SEBI, the PMO has stated that close-ended schemes cannot be segregated or side pocketed as it is unclear whether an inter-lender agreement has been signed in such schemes and would have participated in the resolution process Whether or not The letter stated, 'It will be important to clarify that close-ended schemes can participate in the resolution process. For such schemes, the Reserve Bank of India and the Ministry of Finance, together with SEBI, can set up the Covid-19 Support Fund to compensate for inequality during the resolution process.
SEBI in August 2019 allowed AMC to enter into an inter-lender agreement with certain conditions. This was done because of the investment in debt schemes of Dewan Housing Finance, which was in crisis. It stipulated that the AMC may exit the inter-lender agreement if the settlement plan is not implemented within 180 days and the fund house is free to take legal action in case of violation of the terms of the agreement. According to the PMO, there should be a condition in the participation process. The letter reads, 'The reconciliation process is collective action, the fund house must unconditionally be involved in this process.'
Sources in the mutual fund's organization Amphi said that no mutual fund is a party to such an agreement and they are working with banks to settle cases like DHFL. The PMO has also raised the issue of doubt as to whether the trustee of the debenture can sign the inter-lender agreement or not, and how to get approval from the debenture holders for the same. The PMO thinks that in the event of the participation of debenture trustees in the agreement, they should also be included and in case they vote against the resolution plan, the minority stake should be protected through the liquidation price. Revision is suggested. It states that the time should be increased from immediate to 15 days for the separation of the trapped assets. This will help the mutual funds to take necessary action as per the competitive investors/lenders.
LSG vs MI: Hardik Pandya fined Rs 24 lakh, Mumbai Indians players also got strict punishment
Mumbai Indians captain Hardik Pandya was fined Rs 24 lakh for violating the IPL code of conduct.
APP vs BJP: BJP counterattacked on Kejriwal's Hindutva card, said- "This is wrong"
Before the Gujarat elections, the political battle between the Aam Aadmi Party and the BJP has no
There is now uneasy peace after the violence in the US capital Washington DC on Thursday. Capitol
The IPL 2024 match will be played today between Punjab Kings and Lucknow Supergiants. This match
Struggling actors and actresses are often cheated in the name of films. Many times people are imp
Indian cricket fans witnessed a heartwarming moment in Ranchi late Thursday night. A viral video
Now women will not hesitate to go to the police stations in Uttar Pradesh and register their comp
The Deol family is going through one of the most emotional moments of their lives. Dharmendra, a
Reserve Bank of India Governor Shaktikanta Das has said that yesterday itself we started the tria
After the crushing defeat in Australia, the Board of Control for Cricket in India (BCCI) has now
