Contents

Mutual Funds Franklin Templeton debt funds winding up SEBI India credit risk liquidity crisis 2020

Franklin Templeton six-scheme winding-up (April 2020)

From WebNotes.in, a public knowledge base. Last updated . Reading time ~16 min.

The Franklin Templeton six-scheme winding-up is the closure of six open-ended debt schemes of the SEBI-registered Franklin Templeton Mutual Fund, decided by its trustee on 23 April 2020 under Regulation 39(2)(a) of the SEBI (Mutual Funds) Regulations 1996, with Rs 25,648 crore of assets and 3,15,600 unitholders. This page is the dated timeline of the episode; the legal analysis, the vote results and the distribution table are in the main article on the Franklin Templeton winding-up of 2020 .

An earlier version of this page gave wrong dates for most events: it placed the Supreme Court stay in October 2020, the e-vote in June 2021, the first distribution in October 2021 and the SEBI order in June 2022, and cited a nonexistent amending circular 2020/203. Each date below is taken from the court orders, the SEBI order or Franklin’s own filings named against it.

Timeline of the winding-up, 2020 to 2025

The six schemes were Franklin India Ultra Short Bond Fund, Franklin India Low Duration Fund, Franklin India Short Term Income Plan, Franklin India Credit Risk Fund, Franklin India Dynamic Accrual Fund and Franklin India Income Opportunities Fund. The events run from the first segregation of a downgraded bond in January 2020 to the pending appeals reported in November 2025.

DateEventSource
24 January 2020Vodafone Idea bonds segregated after Crisil’s downgrade below investment gradeFranklin wind-up factsheet, 28 February 2023
6 March 2020YES Bank AT1 bond segregated after ICRA’s downgradeFranklin wind-up factsheet, 28 February 2023
23 April 2020Trustee decides to wind up the six schemes; Rs 25,648 crore of assetsSupreme Court order, 12 February 2021, para 4
24 April 2020Subscriptions and redemptions stopFranklin wind-up factsheet, 28 February 2023
27 April 2020RBI opens a Rs 50,000 crore Special Liquidity Facility for Mutual FundsRBI press release 2019-2020/2276
24 October 2020Karnataka High Court upholds the decision but bars implementation without unitholder consent by simple majorityKarnataka High Court judgment, para 290
6 November 2020SEBI requires open-ended debt schemes to hold 10 per cent in liquid assetsSEBI circular SEBI/HO/IMD/DF3/CIR/P/2020/229
3 December 2020Supreme Court permits the trustees to convene a unitholder meetingSupreme Court order, 12 February 2021, para 20
18 December 2020SEBI appoints T.S. Krishnamurthy, former Chief Election Commissioner, as ObserverSupreme Court order, 12 February 2021, para 22
26 to 29 December 2020E-voting and unitholder meeting; every scheme approves, 96.78 to 97.97 per cent of votes in favourSupreme Court order, 12 February 2021, para 26
2 February 2021Objectors agree to distribution of Rs 9,122 crore held in cash on 15 January 2021Supreme Court order, 12 February 2021, para 4
12 February 2021Supreme Court holds consent means a simple majority of those voting; appoints SBI Funds Management to liquidate and distributeSupreme Court order, 12 February 2021, paras 19, 40 and 42
February 2021First tranche, Rs 9,121.59 crore, based on the NAV of 12 February 2021Franklin wind-up factsheet, 28 February 2023
7 June 2021SEBI order WTM/GM/IMD/08/2021-22: refund of Rs 512.51 crore of fees with interest, Rs 5 crore penalty, two-year bar on new debt schemesSEBI order, para 7.1
June and July 2021SAT stays the June 2021 orders against an aggregate escrow deposit of Rs 257.5 croreFranklin Resources Form 10-K, fiscal 2025
14 July 2021Supreme Court holds consent is required after the Regulation 39(3) notice, not beforeSupreme Court order, 14 July 2021, para 42
18 November 2021Cumulative distribution reaches 99.60 per cent of AUM on Franklin’s baseFranklin wind-up factsheet, 28 February 2023
25 January 2022Amended Regulation 39(3) requires consent by simple majority, one vote per unit, within 45 daysSEBI (Mutual Funds) (Amendment) Regulations 2022
17 February 2023Eleventh tranche; cumulative Rs 26,931.27 crore, 106.81 per centFranklin wind-up factsheet, 28 February 2023
September 2023All performing securities sold; Rs 27,508.1 crore distributed in allFranklin Resources Form 10-K, fiscal 2025
10 November 2025SAT appeals still pendingFranklin Resources Form 10-K, fiscal 2025

SEBI order of 7 June 2021

SEBI’s order WTM/GM/IMD/08/2021-22 of 7 June 2021 followed a forensic audit by Chokshi and Chokshi LLP, and directed Franklin Templeton Asset Management (India) Private Limited to refund the investment management and advisory fees collected on the six schemes from 4 June 2018 to 23 April 2020, Rs 451.63 crore, with 12 per cent simple interest of Rs 60.88 crore, a total of Rs 512.51 crore. It also imposed a Rs 5 crore penalty and barred new debt schemes for two years. Franklin Resources reports aggregate penalties of Rs 20.0 crore across all the June 2021 orders, including those against the trustee company and employees; individual amounts are not stated here because they could not be confirmed against a SEBI order.

Repayment of unitholders

Franklin Templeton unitholders were repaid more than the assets at closure. Franklin’s factsheet of 28 February 2023 records Rs 26,931.27 crore distributed in 11 tranches, 106.81 per cent of the AUM on 23 April 2020 on Franklin’s own base of about Rs 25,214 crore, with five of six schemes above 100 per cent. Franklin Resources’ Form 10-K for fiscal 2025 reports Rs 27,508.1 crore distributed by September 2023. No money was paid between April 2020 and the Supreme Court orders of February 2021.

Regulatory changes

SEBI’s changes after the closure were circulars on liquidity and risk disclosure, plus one amendment to the regulations on the vote:

  • circular SEBI/HO/IMD/DF3/CIR/P/2020/197 of 5 October 2020, a six-level riskometer from 1 January 2021;
  • circular SEBI/HO/IMD/DF3/CIR/P/2020/229 of 6 November 2020, the 10 per cent liquid-asset floor from 1 February 2021 and stress testing from 1 December 2020;
  • circular SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/573 of 7 June 2021, the Potential Risk Class matrix from 1 December 2021;
  • circular SEBI/HO/IMD/IMD-II DOF3/P/CIR/2021/631 of 29 September 2021, swing pricing , implemented from 1 May 2022;
  • the SEBI (Mutual Funds) (Amendment) Regulations 2022, in force 25 January 2022, now Regulation 36 of the SEBI (Mutual Funds) Regulations 2026 .

See also

Related articles

Published by

webnotes.in covers Indian capital markets, payments infrastructure and retail investor procedures. Every article is fact-checked against primary sources, principally SEBI circulars and master directions, NPCI specifications and the official support documentation published by the intermediary in question. Revisions are tracked against the SEBI and NPCI rule changes referenced in the article.

Last reviewed
Conflicts of interest
WebNotes.in is independent. No relationship with any broker, registrar or bank named in this article.