While the promised fiscal package is going to be a key catalyst event, the RBI has emerged as the key player in the resistance against the current economic turmoil. The central bank on Monday announced a Rs 50,000 crore special liquidity facility for mutual funds (SLF-MF) after redemptions rose due to Franklin Templeton closing six debt mutual funds in the last week.
Funds availed under the SLF-MF shall be used by banks exclusively for meeting the liquidity requirements. MFs can avail this facility against the collateral of investment-grade corporate bonds, commercial papers (CPs), debentures and certificates of Deposit (CDs).
Key takeaways:
The new SLF-MF will ensure enough liquidity to high-quality mutual fund schemes against the redemption pressure. It will also boost investor's confidence that there is enough liquidity to meet the redemption requirement.
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