News Brief
RBI Announces Rs 50,000 Crore Special Liquidity Facility For Mutual Funds; Here Are The Details
Swarajya Staff
Apr 27, 2020, 11:11 AM | Updated 11:11 AM IST
Save & read from anywhere!
Bookmark stories for easy access on any device or the Swarajya app.
In a positive development, the Reserve Bank of India (RBI) on Monday (27 April) announced Rs. 50,000 crore Special Liquidity Facility (SLF) for mutual funds (MFs), reports Hindustan Times.
The move has been done to ease the liquidity pressures on the mutual funds as just last week Franklin Templeton fund house halted withdrawals from six debt mutual fund schemes.
In a press release, RBI stated that “the heightened volatility in capital markets in reaction to COVID-19 has imposed liquidity strains on mutual funds (MFs), which have intensified in the wake of redemption pressures related to closure of some debt MFs and potential contagious effects therefrom.”
The stress is, however, confined to the high-risk debt MF segment at this stage; the larger industry remains liquid, RBI said.
Here are the details:
- The SLF- MF scheme is effective from today (27 April) till 11 May 2020 or till the time the allocated fund is utilised, whichever is earlier. Further the RBI has stated that it will review the timeline and amount, depending upon market conditions
- The SLF-MF will be an on-tap and open-ended facility, where banks can submit their bids to get funding on any from Monday to Friday, except on holidays.
- Under the scheme, the RBI will conduct repo operations of 90 days tenor at the fixed repo rate. This special repo window will be available to all LAF eligible banks against eligible collateral.
- The minimum bid amount would be Rs one crore and multiples thereof. The allotment would be in multiples of Rs one crore.
- Funds availed under the SLF-MF shall be used by banks exclusively for meeting the liquidity requirements of MFs.
- Banks can extend loans to mutual funds, undertaking outright purchase of and/or repos against the collateral of investment grade corporate bonds, commercial papers (CPs), debentures and certificates of deposit (CDs) held by mutual funds.
Save & read from anywhere!
Bookmark stories for easy access on any device or the Swarajya app.
Support Swarajya's 50 Ground Reports Project & Sponsor A Story
Every general election Swarajya does a 50 ground reports project.
Aimed only at serious readers and those who appreciate the nuances of political undercurrents, the project provides a sense of India's electoral landscape. As you know, these reports are produced after considerable investment of travel, time and effort on the ground.
This time too we've kicked off the project in style and have covered over 30 constituencies already. If you're someone who appreciates such work and have enjoyed our coverage please consider sponsoring a ground report for just Rs 2999 to Rs 19,999 - it goes a long way in helping us produce more quality reportage.
You can also back this project by becoming a subscriber for as little as Rs 999 - so do click on this links and choose a plan that suits you and back us.
Click below to contribute.