VR Logo

Debt Funds Restrict Redemption

Debt funds restrict redemption to tide over liquidity crunch

Tight liquidity conditions in the Indian financial system and investors' complete risk-aversion following the global financial crisis has lead to massive redemption from Indian debt funds. Two fund companies -- ABN AMRO (now Fortis) and Mirae have put restrictions on the scale of redemptions every day.

Mirae Asset Mutual Fund has restricted the redemption amount for its unit holders in  Mirae Asset Liquid Plus Fund. Investors in fund can redeem a maximum of 5 per cent of the total asset on each working day. This is effective October 14, 2008. If the amount of redemption request exceeds 5 per cent of the scheme’s asset on that day, the remaining redemption amount will be carried forward to the next working day and will be provided on pro rata basis depending on the size of redemption. However, for its retail investors, maximum redemption request of Rs 1 Lakh will be honored on each working day.

ABN AMRO Mutual Fund has also introduced similar restriction in its set of FMPs allowing the investors to redeem Rs 1 Lakh under each folio number on each working day. Here also, the total redemption under each scheme on each working day is restricted to 5 per cent of the total number of units available in the scheme. This change is applicable under the following fixed income schemes - ABN AMRO Fixed Term Plans – Series 9 (Plan A), Series 10 (Plan B, Plan E and Plan F), Series 11(Plan A and Plan B), Series 12(Plan A and Plan B) and Series 13 (Plan A, Plan B, Plan C and Plan D) and is effective from October 15, 2008.