After Franklin Templeton shuts debt schemes, Chidambaram asks govt to step in

Franklin Templeton, one of the first global financial firms to launch asset management operations in India more than two decades ago, said on Thursday it would close the yield-oriented, managed credit funds.

Former finance minister P Chidambaram said on Saturday the government must act promptly and resolve the situation after Franklin Templeton closed six of its debt schemes in India, citing severe market dislocation and illiquidity caused by the coronavirus pandemic.

Congress leader P Chidambaram pointed out how the UPA government had handled a similar situation during the global financial crisis in 2008 when mutual funds faced liquidity stress. (PTI file photo)

Franklin Templeton, one of the first global financial firms to launch asset management operations in India more than two decades ago, said on Thursday it would close the yield-oriented, managed credit funds.

The senior Congress leader said it was a matter of grave concern to investors, the mutual fund industry and the financial markets.

Chidambaram also pointed out how the United Progressive Alliance (UPA) government had handled a similar situation during the global financial crisis in 2008 when mutual funds faced liquidity stress.

“Government immediately consulted RBI, SEBI, IBA, AMFI and others. An urgent meeting of the FSDC was convened and a solution was found by the end of the day. On the next morning, officers of RBI and SEBI met at 8 am, and RBI announced a 14-day special repo facility and allowed an additional 0.5 per cent of NDTL. The situation was resolved,” the Congress leader said in a statement.

“Fortunately, the markets will be closed today and tomorrow. I expect that the government will act promptly and resolve the situation quickly,” he added.

Franklin Templeton had said in a statement that the decision to close the schemes “in order to protect value for investors via a managed sale of the portfolio.”

The decision was limited to funds which have “material direct exposure to the higher-yielding, lower-rated credit securities in India that have been most impacted by the ongoing liquidity crisis in the market,” the statement said.

The funds included Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund and Franklin India Income Opportunities Fund.