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RBI whip on banks knocks mutual funds

business Updated: Feb 02, 2010 22:01 IST
HT Correspondent

The new year has started with a setback for mutual funds. January saw their assets under management (AUM) eroded by Rs 32,849 crore.

The sector got hit from two sides during the month. The Reserve Bank of India dealt the harder blow with an advisory to banks that asked them to limit their exposure to mutual funds. The fall in stock markets made it a double whammy for the asset management companies.

Data released by the Association of Mutual Funds of India (AMFI) shows average AUM for the industry in January down to Rs 7.6 lakh crore from Rs 8 lakh crore in December.

Mutual fund players say RBI’s advisory kept December’s payouts from mutual funds from being reinvested in January.

“RBI’s guideline to the banks to limit their exposure in mutual funds has had an impact on the inflow of bank money to mutual funds, as the money that went out as a routine in December, did not come back to the industry in January,” said the head of a mutual fund who did not wish to be named.

Almost all MF players saw AUMs decline in January, even though the industry witnessed a rise in equity investments, especially in the tax saving and other successful schemes.

“The fall in the markets in the month of January and not a significant rise in overall equity inflows have also contributed to the drop in AUMs for the industry,” said Jaideep Bhattacharya, chief marketing officer, UTI Mutual Fund.

In January alone, the Sensex lost 6.8 per cent value, closing the month at 16,357 points.

Almost all the mutual funds witnessed a dip in the overall funds they manage. While Reliance Mutual fund saw its AUM dip 2.3 per cent or Rs 2,733 crore, Kotak Mahindra Mutual Fund and Birla Sun Life Mutual Fund saw their AUMs dip 11 per cent and 8 per cent respectively. In absolute numbers, Birla Sun Life lost the maximum — Rs 5,469 crore.