InvestorQ : How has been the response to the special MF liquidity fund of Rs.50,000 allocated by the RBI after the Templeton fiasco? Are mutual funds utilizing the facility?
ishika Banerjee made post

How has been the response to the special MF liquidity fund of Rs.50,000 allocated by the RBI after the Templeton fiasco? Are mutual funds utilizing the facility?

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Niti Shenoi answered.
1 year ago
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In one word, the response has been pathetic. The credit lines opened by RBI for debt mutual funds saw participation worth just Rs.2430 crore of the Rs.50,000 crore window. MFs preferred to sell securities to banks and other counter parties instead of availing fresh credit lines. The window was to be kept open from April 27 to May 11. The RBI had allowed banks to hold bonds purchased from MFs under this liquidity programme, in held-to-maturity book even if it was in excess of 25% of the total permitted investment. In a way, the RBI window did have a sentimental impact because it allayed investor nerves. Also, yields on non-AAA papers have now eased by 20-25 basis points. MF managers have also said that in many cases the fund borrowing levels were close to 20% of scheme assets so there was no scope to borrowing beyond the regulatory ceiling.

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