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