The Reserve Bank of India (RBI) has announced today i.e. on 27 April 2020 that it will provide Rs 50,000 crore special liquidity facility for Mutual Funds in the wake of Franklin Templeton episode.
Under the SLF-MF, RBI will conduct repo operations of 90 days tenor at fixed repo rate. The SLF-MF is on-tap & open-ended. Banks are allowed to submit their bids to avail funding on any day from Monday to Friday.
This scheme will be available from today till May 11, 2020, or till the utilisation of the allocated amount. However, it can be noted that the funds which are available under SLF-MF can be used by banks “exclusively” for meeting liquidity requirements of Mutual Funds.
RBI further added that it will review the timeline and amount, which depends upon market conditions that will prevail in future. The aim of this move of RBI is to help in easing liquidity pressure on the Mutual Fund industry, which has been under pressure due to the Covid-19 lockdown.
On Friday, Franklin Templeton has shut down 6 active mutual funds in India. Thus, creating panic across the MF industry. The experts have also feared that the move could have a contagion effect on many other active MFs. RBI also said that it is committed to mitigating economic risks which are coming amid Covid-19 and is continuously monitoring all segments & sectors to minimise stress.
P Chidambaram, a Senior Congress leader has welcomed RBI’s move & 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.”
