New Delhi, April 27
To ease liquidity pressures on mutual funds, Reserve Bank of India today announced a special liquidity facility of ₹50,000 crore for mutual funds. Indian stock markets surged immediately after the RBI announced this liquidity facility for mutual funds.
The Sensex was up about 750 points. Mutual fund investors had received a jolt late last week when Franklin Templeton fund house halted withdrawals from six debt mutual fund mutual schemes with large exposures to higher-yielding, lower-rated credit securities, citing lack of liquidity amid the coronavirus pandemic.
The RBI stated that the coronavirus lockdown has “heightened volatility in capital markets” and has “imposed liquidity strains on mutual funds (MFs)”. The central bank said that redemption pressures related to closure of some debt mutual funds intensified liquidity strains.
However, the RBI added that the stress at this stage is confined only to the high-risk debt mutual fund segment and “the larger industry remains liquid”.
“The SLF-MF is on-tap and open-ended, and banks can submit their bids to avail funding on any day from Monday to Friday (excluding holidays),” the RBI release read.