Question

    What concern did SEBI highlight regarding the mutual

    fund industry's response times to large redemptions, prompting the need for industry-wide stress tests?
    A Response times to large redemptions have significantly improved since 2020 Correct Answer Incorrect Answer
    B Response times to large redemptions have remained largely unchanged since 2020 Correct Answer Incorrect Answer
    C Response times are irrelevant to the overall stability of mutual funds Correct Answer Incorrect Answer
    D Response times have only been problematic for small-cap funds Correct Answer Incorrect Answer
    E Response times have been quicker for equity funds than debt funds Correct Answer Incorrect Answer

    Solution

    SEBI expressed concern that response times to large redemptions in the mutual fund industry have remained largely unchanged since 2020, even after initial stress tests were conducted. This issue underscores the need for more comprehensive, industry-wide stress tests to better prepare the mutual fund sector for potential market stresses. The goal is to enhance the sector's resilience, ensuring that mutual funds can more effectively manage sudden large-scale redemptions and protect investors during periods of market volatility.

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