A year after the shock freezing of six schemes of Franklin Templeton Mutual Fund, the pendulum has swung in the diametrically opposite direction. Credit risk funds are shying from credit risk, despite a Sebi mandate to invest at least 65% of their assets in paper rated below AA+. Industry executives point to a lack of demand—corporates simply aren’t borrowing enough. A lingering sense of anxiety following the Franklin episode is likely to also be in play. A direct result of the risk aversion is low yields and a steady migration of customers to fintechs offering direct debt to investors.
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