Franklin Templeton India Crisis: RBI announces Rs 50,000 crore special liquidity facility for mutual funds

Last week, Franklin Templeton Mutual Fund shut six of its open-ended debt funds, effective April 23.

Moneycontrol News

April 27, 2020 / 11:25 IST

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.

Last week, Franklin Templeton Mutual Fund shut six of its open-ended debt funds, effective April 23. “Due to the on-going novel coronavirus, or COVID-19, pandemic, liquidity in the bond market has dried up. Yields of debt securities have risen sharply and that has materially diminished the abilities of companies to service their debt. Mutual funds have also been getting a lot of redemption requests. We felt it best under these circumstances to wind up these funds and return the money to investors,” Sanjay Sapre, President, Franklin Templeton – India, said.

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