The RBI on Monday announced Rs 50,000 crore liquidity infusion to support mutual funds.
Under RBI’s Special Liquidity Facility Scheme, The Central Bank will conduct repo operations with a 90-day tenor. Banks can avail funding on any day from Monday to Friday.
Under the special liquidity facility scheme effective today, the RBI will conduct repo operations of 90 days tenor at the fixed repo rate. The facility will be on-tap and open-ended, and banks can submit their bids to avail funding on any day from Monday to Friday, RBI said.
This is expected to support the mutual fund investors in view of the Franklin Templeton crisis on Friday when the company announced the winding up of six funds and liquidation of all assets.
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In a release, the RBI said: “Heightened volatility in capital markets in reaction to COVID-19 has imposed liquidity strains on mutual funds which have intensified in the wake of redemption pressures related to closure of some debt MFs and potential contagious effects there from”.
“Exposures under this facility will not be reckoned under the Large Exposure Framework (LEF). The face value of securities acquired under the scheme and kept in the HTM category will not be reckoned for computation of adjusted non-food bank credit (ANBC) for the purpose of determining priority sector targets,” RBI said.
Franklin Templeton Mutual fund on Friday decided to wind up six of its debt schemes in India with effect from April 23, 2020, amid the COVID-19 crisis.
Capital up to Rs 308 billion is locked in and now the company hopes to sell its assets and pay its investors.