Accordingly, under the facility, the RBI shall conduct repo operations of 90 days tenor at the fixed repo rate. The apex bank said that SLF-MF is "on-tap and open-ended", and banks can submit their bids to avail funding. Besides, the scheme is available from April 27 till May 11, 2020 or "up to utilization of the allocated amount, whichever is earlier".
The Reserve Bank further said that it will review the timeline and amount, depending upon market conditions. "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," it said in a statement.
"The stress is, however, confined to the high-risk debt MF segment at this stage; the larger industry remains liquid."
Last week, Franklin Templeton Mutual Fund shut down six of its funds due to credit issues.
Also Read: Resolution period for large stressed assets extended by 90 days: RBI
RBI also reiterated that it is committed to mitigating economic risks arising from Covid-19 and is constantly monitoring all segments and sectors to minimise stress.
Senior Congress leader P Chidambaram also welcomed RBI move and tweeted “I welcome the RBI announcement of a Rs 50,000 crore special liquidity facility for Mutual Funds. I am glad that RBI has taken note of the concerns expressed two days ago and requesting prompt action.”
