2 Kotak Debt Funds Frozen — Is Your SIP Safe?

Kotak Mutual Fund has stopped accepting new investments in two debt funds linked to Yes Bank AT1 bond losses. Existing investors are not blocked from redeeming, but fresh SIPs and lump sums are paused until valuation issues are resolved.

Here's what happened: Kotak Mutual Fund paused all new investments — lump sum and SIP — in its Medium Term Fund and Credit Risk Fund citing unresolved valuation issues around Yes Bank AT1 bonds.. Yes Bank's AT1 bonds were written to zero during its 2020 government-led rescue; ongoing legal proceedings have kept their fair value in dispute, forcing funds holding them to freeze fresh inflows.. Existing unitholders in both funds are not restricted from redeeming their investments — the freeze applies only to new money entering the funds..

What you should do: Check your current debt fund portfolio on your AMC or MF Central app — search the factsheet for 'AT1', 'perpetual bonds', or 'Yes Bank' under the holdings section.. If you have a pending SIP instruction into either of these two Kotak funds, contact your distributor or the Kotak MF helpline immediately to redirect it to an alternative fund before the next instalment date.. Compare alternatives: a short-duration fund or a target-maturity index fund carries far less credit risk than a credit-risk or medium-term fund — use Morningstar or Value Research to compare category risk grades before switching..

AT1 bonds pay higher interest precisely because they can be written down to zero without warning — any debt fund yielding noticeably more than a bank FD likely holds them. Always check the credit quality distribution in the monthly factsheet before investing.