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Pledged shares could create a bigger problem for mutual funds, says Ashvin Parekh Advisory Services

Updated : February 22, 2019 03:17 PM IST

Ashvin Parekh Advisory Services on Friday said pledged shares could create a bigger problem for mutual funds as many promoters depend on this method to raise funds to support their core and non-core business.

In an interview to CNBC-TV18, Ashvin Parekh, managing partner, said, "Both mutual funds, as well as non-banking finance companies (NBFCs) of late, have been participating in some of these transactions.

Share pledging is typically done by promoters to raise funds either for the same company or for financing other projects.

"We had a total mechanism for banking, insurance and pension where investments were more guided by the rating of the instruments. Now, we are gradually shifting to the valuation part of the instrument as well and examining the inherent value of those instruments which the banking system picks up by way of collateral or security," Parekh said.
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