Banks borrow ₹2,000 crore from RBI for mutual funds 

#GS3 #Economy  

Window of ₹50,000 cr. open till May 11; ‘crisis of confidence affecting sentiment’ 

  • Commercial banks have borrowed ₹2,000 crore from the liquidity window that was offered by the Reserve Bank of India for mutual funds (MFs).  
  • The RBI had announced a special window of ₹50,000 crore for mutual funds in view of the redemption pressure that the fund houses are facing.  

Exclusive for MFs  

  • Funds availed under this facility will be used by banks exclusively for meeting the liquidity requirements of MFs.   
  • The scheme was made available from April 27, 2020 till May 11, 2020 or up to utilisation of the allocated amount, whichever is earlier.  
  • There are two issues currently — liquidity and crisis of confidence. The move to provide liquidity is fabulous but one needs to address the root cause as well.  
  • The window was opened by RBI after Franklin Templeton Mutual Fund decided to wind up six debt funds that have combined assets under management of nearly ₹26,000 crore, on account of illiquid, low-rated instruments in their portfolio.  
Print Friendly and PDF
blog comments powered by Disqus