The Reserve Bank of India on Monday offered Rs 50,000 crore special liquidity support to save the Mutual Fund industry in the wake of the Franklin Templeton episode.
On Friday, Franklin Templeton shut down six active mutual funds in India, triggering panic across the MF industry. Experts feared that the move could have a contagion effect on many other active MFs.
Under the special liquidity facility scheme effective today, the RBI will conduct repo operations of 90 days tenor at the fixed repo rate. Under the SLF-MF, RBI will conduct repo operations of 90 days tenor at fixed repo rate. The SLF-MF is on-tap and open-ended, and banks are allowed to submit their bids to avail funding on any day from Monday to Friday.
The scheme that is available from today will last till May 11, 2020, or till the utilisation of the allocated amount.
It may be noted that the funds available under SLF-MF can be used by banks “exclusively” for meeting liquidity requirements of Mutual Funds.
RBI went on to say that it will review the timeline and amount, depending upon market conditions that prevail in future.
The move is aimed towards helping ease liquidity pressure on the Mutual Fund industry, which has been under pressure amid the Covid-19 lockdown.
RBI also reiterated that it is committed to mitigating economic risks arising from Covid-19 and is constantly monitoring all segments and sectors to minimise stress.