RBI pumps Rs 50,000 cr to mutual funds after Franklin Templeton crisis
The global lockdown due to COVID-19 has resulted in increased volatility and has imposed liquidity strains on mutual funds. Central banks also shared the seriousness of closure of some debt mutual funds which enhances liquidity strains.
The RBI taking note for the concern decided to pump Rs 50,000 cr. to ease liquidity pressures on mutual funds. The step was taken after Franklin Templeton rounded up 6 funds last week.
Under this Special Liquidity Facility (SLF) scheme, the RBI will conduct repo operations of 90 days tenor at the fixed repo rate and will be available from today till May 11, 2020, or up to utilization of the allocated amount. Continuous reviewing of the timeline and amount will be regulated by RBI based on the market conditions.
Funds availed under the SLF-MF will be used by banks for Meeting the liquidity requirements of MFs by extending loans, undertaking outright, and preserving financial stability. The firm move was welcomed by Former finance minister P Chidambaram and praised RBI for such active and prompt action.