Highlights:
- RBI announces Rs. 50,000 relief package for Mutual Funds
- Scheme has begun from today and will close on the 11th May
- P Chidambaram has welcomed the initiative from the RBI
The Reserve Bank of India (RBI) on Monday stepped in front and announced a special Rs. 50,000 crore liquid facility for the Mutual Funds (MFs) in the wake of Franklin Templeton episode.
Under the SLF-MF (Special Liquidity Facility for Mutual Fund), the top bank will conduct repo operations for a period of 90 days tenor at fixed repo rate. The SLF-MF is open ended and on-tap which means that banks will be allowed to submit their bids to avail fundings on any weekday i.e. Monday to Friday.
This scheme is available starting today and will last until the 11th of May or till the allocated amount is allocated, whichever comes first.
It was clearly mentioned by the RBI that the funds which are available under SLF-MF can be used by banks “exclusively” for meeting the minimum liquidity requirements of the Mutual funds.
The apex bank said that it will review the amount and the timeline depending on the market conditions in the future.
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This relief is aimed to help the liquidity pressure on the MF Industry which has been under tremendous pressure amind the lockdown imposed across India to contain the spread of the novel Coronavirus.
Last week, on Firday, Franklin Templeton – a global investment firm – shut down 6 active MFs in India which triggered a pan India level panic in the MF Industry. Experts feared that this move could have a contagion effect on many other active MFs in India.
RBI, during the announcement, repeated itself and said that the top bank is committed to mitigating economic risks which have surfaced due to the deadly pandemic and the bank is constantly monitoring all sectors and segments to minimise pressure.
The step from RBI was welcomed by senior Congress leader P Chidambaram who said, “I welcome the RBI’s announcement of a Rs 50,000 crore special liquidity facility for Mutual Funds. I am glad that RBI has taken note of the concerns expressed two days ago and requesting prompt action.”
I welcome the RBI’s announcement of a Rs 50,000 crore special liquidity facility for Mutual Funds. I am glad that RBI has taken note of the concerns expressed two days ago and requesting prompt action.
— P. Chidambaram (@PChidambaram_IN) April 27, 2020
