The Reserve Bank of India’s (RBI’s) Financial Stability Report (FSR) has highlighted that debt mutual funds (MFs) remain susceptible to exits from large-ticket investors, even as regulations have placed caps on single-investor holding in schemes to avoid concentration. “Existing regulations specify single-investor concentration norms for diversifying the investor base. However, when the investor profile is dominated by risk-averse investors, as is the case in money market/debt MFs, there is a strong possibility of a few corporations distributing their surplus to over four-five fund houses, and hence, exits during times of stress could still be concerted,” RBI observed in its 21st issue of the FSR.
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