RBI announces ₹50,000 crore special liquidity facility for mutual funds

The Reserve Bank of India (RBI) on Monday (April 27) announced a ₹50,000 crore special liquidity facility for the mutual fund, days after Franklin Templeton Mutual Fund decided to close six debt schemes.

In a statement, the central bank said heightened volatility in capital markets in reaction to COVID-19 has imposed liquidity strains on mutual funds (MFs), which have intensified in the wake of redemption pressures related to closure of some debt MFs and potential contagious effects therefrom.

The stress is, however, confined to the high-risk debt MF segment at this stage; the larger industry remains liquid, it said.

“With a view to easing liquidity pressures on MFs, it has been decided to open a special liquidity facility for mutual funds of ₹50,000 crore,” it said.

The RBI also stressed it remains vigilant and will take whatever steps are necessary to mitigate the economic impact of COVID-19 and preserve financial stability.