Investors continue to remain cautious about non-banks. Data released by Sebi shows that exposure of debt mutual fund to the sector fell 20% year-on-year (y-o-y) in August to Rs 2 lakh crore. Market participants say demand for debt papers issued by NBFCs has fallen in the last one year after several defaults and downgrades in the sector. Exposure of debt mutual funds to corporate debt papers issued by NBFCs – including floating rate bonds, non-convertible debentures and other debt instruments — was at a near two-year low in August at Rs 98,242.76 crore. Exposure to short-term debt instruments like commercial papers (CPs) was at a three-month low at Rs 1.01 lakh crore, according to Sebi data. In August last year, mutual funds had invested around Rs 2.48 lakh crore in both CPs and corporate debt issued by NBFCs. Debt funds had an overall exposure of 13.6% towards NBFC debt in August 2019, as against 16.86% in August 2018.