Kotak Mahindra Mutual Fund has temporarily suspended fresh and additional lump-sum investments, switch-in transactions and new SIP/STP registrations in Kotak Medium Term Fund and Kotak Credit Risk Fund from October 15.
According to a notice-cum-addendum issued by the fund house, instalments under existing systematic investment plans (SIPs) and systematic transfer plans (STPs) registered before October 15 will continue to be processed at the applicable net asset value (NAV).
Kotak Mahindra Asset Management Company said the two funds hold Yes Bank Additional Tier 1 (AT1) bonds that are currently valued at nil market value following an RBI order for their write-off.
The fund house said it, along with other investors, had approached the court in connection with the matter. It added that a favourable judgment could lead to a significant increase in the market value of the bonds, potentially affecting the funds’ NAVs.
The suspension of fresh subscriptions has been introduced as a precautionary measure, the fund house said.
Background
Yes Bank’s AT1 bonds worth ₹8,415 crore were written off in March 2020 as part of the bank’s restructuring. The write-off was subsequently challenged in court.
The Bombay High Court set aside the write-off in January 2023. The Supreme Court upheld the High Court’s decision on October 15, 2026.
AT1 bonds are a form of bank capital that can absorb losses under specified conditions. Their terms carry risks for investors, including the possibility of a write-off.
All other terms and conditions of Kotak Medium Term Fund and Kotak Credit Risk Fund remain unchanged, according to the notice.
NOTE TO READERS
Disclaimer: This article is for informational purposes only and should not be construed as investment advice. Readers should consult certified experts before making any investment decisions.