RBI Announces Special Liquidity Facility For Mutual Funds

The Reserve Bank of India (RBI) on Monday announced a special liquidity facility for mutual funds worth Rs 50,000 crore to help them deal with the liquidity strains caused by heightened volatility in capital markets due to COVID-19.

The central bank said that is decision comes in the wake of "redemption pressures related to the closure of some debt MFs and potential contagious effects therefrom" but added that the stress is, however, "confined to the high-risk debt MF segment at this stage; the larger industry remains liquid."

"With a view to easing liquidity pressures on MFs, it has been decided to open a special liquidity facility for mutual funds of Rs 50, 000 crore," RBI said in a statement.

"Under the SLF-MF, the RBI shall conduct repo operations of 90 days tenor at the fixed repo rate. 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 scheme is available from today i.e., April 27, 2020 till May 11, 2020 or up to utilization of the allocated amount, whichever is earlier. The Reserve Bank will review the timeline and amount, depending upon market conditions," it added.