The Reserve Bank of India (RBI) on Monday announced a Rs 50,000 crore special liquidity facility for mutual funds as redemptions rose after Franklin Templeton closed six debt mutual funds last week.
The scheme is available from April 27, 2020 till May 11, 2020 or up to utilization of the allocated amount, whichever is earlier. The Reserve Bank will review the timeline and amount, depending upon market conditions.
RBI 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, RBI said.