Mutual Funds to de facto side pocket Yes Bank

As Yes Bank exits Nifty Indices on 19th March and S&P BSE Indices on 20th March, mutual funds have decided to de facto seggregate their exposure to Yes Bank held through Index Funds and Exchange Traded Funds (ETFs). The government reconstruction plan for Yes Bank locks in existing investors with more than 100 shares of Yes Bank for a period of 3 years. Such investors can only sell up to 25% of their shares. However this has placed index funds and ETFs in a quandary because they are mandated to track indices and change their composition when indices change. As Yes Bank exits all indices, they can no longer hold the stock as per their mandate.

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