@padraig_leigheanach PC is right in saying that this is mainly a liquidity related (actually illiquidity) stress event. Which can/should be managed by govt/RBI/SEBI providing liquidity to the AMCs.
The underlying bonds, even if they are less credit-worthy than others, have not defaulted. Yet. Whether they will do so or not is a matter of assessment. Without this lockdown event, things may have worked out or may not have.
However, given the situation, liquidity measures could have prevented such a winding down of these funds.
An analogy:
background:
- you are a super speciality doctor, having practice at a corporate hospital, and a home loan.
- the lockdown forced the hospital to lay you off (true for many, even in these times when doctors are much needed).
- there is no relief by the RBI for home loan interest payouts. (This is what is different from the liquidity problem).
- the doctor has other real estate assets too, but they are illiquid in the present market.
- All his assets are unfortunately illiquid. But he had thought about his good and solid income from the hospital.
Now, the bank after seeing that 3 months EMI haven't been paid, declares the home as NPA and wants to takeover. They are justified legally.
The doctor could have paid the EMI from his other assets, but they are illiquid. He took extra risk without considering a black swan event like a complete lockdown. He still has the human capital to payout the EMI later. But by rules, the house will go for a takeover by the bank.
One can say, he should have kept emergency funds for 6 months or so. and since he didn't plan for this, he is the culprit and
deserves this.
YMMV.