Mutual funds get Rs 50,000 special liquidity support from RBI amid lockdown
The Reserve Bank Of India’s (RBI) liquidity offer has given some level of solace the debt market, which is feeling tremendous recovery pressure, particularly in credit risk investments. On Monday, the RBI announced a Rs 50,000 crores Special Liquidity Facility Scheme. Since the lockdown announcement from the end of March, mutual fund investors bared a severe jolt with twofold digit losses in MF’s.
The coronavirus pandemic had shaken the global economy and businesses. Numerous sectors acknowledged the cold hard facts within the initial announcement of the lockdown, for example, the energy sector fell by 20.08 %, the ELSS sector fell by 16.50 %, the infrastructure shares declined by 19.07 %, the international sector shares collapsed by 20.07 %, and the Banking sector shares decreased by 19.54 %. Notably, the Yes Bank disaster added worst to the Banking sector amid Covid-19.
RBI’s Special Liquidity Facility Scheme is a sigh of relief for all the investors. Under the new liquidity facility for Mutual Funds (SLF-MF), the RBI will start repo services of 90 days tenor at the fixed repo rate. The SLF-MF is on-tap and open-ended. The banks can send their bids till May 11 to get fundings or up to use of the assigned amount, whichever is essential.
Funds profited under the SLF-MF will be utilized by banks only for meeting the liquidity necessities of MFs. The RBI demanded it is limited to the high-risk debt MF share at this platform. The apex bank stated that the larger industries would remain liquid.
India has faced immense losses in Mutual Funds, and the liquidity schemes availed under the plan would be qualified to be called held to maturity (HTM), and over 25 percent of total investment would be allowed to be added in the HTM portfolio, RBI added.
Article Credit: The Economic Times/Business Today/ET Now