The rising volatility of capital market is putting financial strains on the Mutual Funds (MFs). The COVID-19 outbreak has led to the closure of many debt MFs thus intensifying a wake in redemption pressure.
By observing this situation the Reserve Bank of India (RBI) has taken the decision of opening the INR 50,000 crore of liquidity funding for easing the pressures on the MFs and maintaining the financial stability.
Under this SLF-MF, RBI will conduct repo operations of 90 days tenor at the fixed repo rate. The scheme has been set to be available from 27th April’20 to 11th May’20 or up to the time of utilization of the allocated amount, whichever happens to be earlier.
The funds under the SLF-MF will be available to the eligible banks who can use it exclusively for satisfying the liquidity requirements of MFs either by extending loans or by undertaking the outright purchase of and/or repos against the collateral of investment grade corporate bonds, Commercial Papers (CPs), debentures and Certificates of Deposits(CDs) held by MFs.