RBI announces Rs 50,000 crore support for mutual funds amid coronavirus COVID-19 crisis

In an obvious effort to ease liquidity pressures on mutual funds, the Reserve Bank of India (RBI) on Monday (April 27) introduced a particular liquidity support of Rs 50,000 crore for mutual funds to tide over the coronavirus COVID-19 crisis. 

The new scheme might be efficient from Monday (April 27) until May 11, 2020 or as much as utilization of the allotted quantity, whichever is earlier. The RBI mentioned that it’s going to evaluate the timeline and quantity, relying upon market circumstances.

The RBI additionally introduced that below this facility, it can give funds to banks at decrease charges and banks might be allowed to avail funds for assembly the liquidity necessities of mutual funds.

The RBI has additionally allowed the banks to increase loans to mutual funds, endeavor outright buy of and/or repos towards the collateral of funding grade company bonds, business papers (CPs), debentures and certificates of deposit (CDs) held by mutual funds.

The repo operations of 90 days tenor on the mounted repo charge might be performed by the RBI. The central financial institution mentioned that this liquidity facility is on-tap and open-ended and banks might be allowed to avail funding on any day from Monday to Friday (excluding holidays).

The RBI assserted it “remains vigilant and will take whatever steps are necessary to mitigate the economic impact of COVID-19 and preserve financial stability.”

The central financial institution, nonetheless, additionally famous that at this level of time the high-risk debt mutual fund phase is going through the chance attributable to coronavirus outbreak.

“The larger industry remains liquid. 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 RBI mentioned.

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