Mumbai: SBI Funds Management has doubled exit fees on fixed maturity plans to up to 4%, joining firms such as ICICI Prudential, who have increased fees to stave off the largescale redemptions seen in the last two months.
Nearly Rs800 billion flowed out of income funds, mainly from close-end fixed maturity plans (FMP), in September-October, as investors pulled out to meet their liquidity needs, in turn creating a credit crunch for the industry.
“As of now there is no such risk in the market. Going forward there could be such risk. We have been cautious about it,” said Chief Marketing Officer R.S. Srinivas Jain.
FMPs invest in debt instruments and hold them till maturity. If they sell the securities ahead of maturity under pressure from redemptions, they might suffer losses and affect returns for investors who chose to stay put in the fund.
“We are doing it to ensure that under extreme stress and volatility, the fund is in a position to take care of its existing investors,” Jain said.
He added that redemption pressure for the industry had eased and said his fund house collected about Rs8 billion from nearly 4,000 investors in a FMP last week.
The fund house will charge 0.5% to 4% exit fees on SBI debt fund series schemes with maturities ranging from 30 days to 18 months, launched on or after 19 November, it said in a notice.