ABSTRACT
On March 26, 2021, Priya Tendulkar, CEO of BlueStar Asset Management Company Ltd. (BlueStar-AMC), called for an early morning meeting of fund managers of its debt and hybrid schemes. Most of its debt and hybrid schemes had investments in Additional Tier-1 (AT1) Perpetual Bonds and Tier-2 bonds issued by Indian Banks. Security Exchange Board of India (SEBI) circular on March 15, 2021, on capping mutual funds exposure to AT-1 and Tier-2 bonds and valuing AT-1 bonds at 100-year maturity bonds came as a rude shock for the mutual fund industry. The fear of redemptions and panic selling of AT-1 bonds gripped the industry. AT-1 bonds yield of reputed issuers like State Bank of India (SBI) also jumped by as much as 100 basis points on March 16, 2021. Since then, SEBI had issued an amendment to its circular and AMFI had issued guidelines for valuation of AT-1 and Tier-2 bonds on March 25, 2021.
