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RBI extends regulatory benefits under SLF-MF scheme to even banks deploying own funds

On April 27, 2020, the Reserve Bank announced a Rs 50,000 crore special liquidity facility for mutual funds (SLF-MF) to ease liquidity strains on them due to redemption pressures.

April 30, 2020 / 02:55 PM IST

The Reserve Bank of India (RBI) on April 30 said the regulatory benefits announced under the SLF-MF scheme will be extended to all banks, irrespective of whether they avail funding from the Reserve Bank or deploy their own resources under the above-mentioned scheme.

On April 27, 2020, the RBI had announced a special liquidity facility for mutual funds (SLF-MF) worth Rs 50,000 crore. This was aimed at easing the liquidity strains on MFs, which intensified in the wake of redemption pressures following the closure of six debt funds by Franklin Templeton India. This has led to fears of potential contagious effects.

In a release, RBI laid out the following eligibility criteria to claim the regulatory benefits under SLF-MF scheme:

- banks meeting the liquidity requirements of MFs by extending loans, and

- banks undertaking an outright purchase of and/or repo against the collateral of investment-grade corporate bonds, commercial paper (CPs), debentures and certificates of deposit (CDs) held by MFs

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These banks will not be required to avail back-to-back funding from the central bank under the SLF-MF scheme.

However, the bank claiming these extended regulatory benefits will be required to submit a weekly statement containing consolidated information on entity-wise and instrument-wise loans and advances extended or investment made to eligible entities to Financial Markets Operations Department (email) and to Department of Supervision (email) on every Monday till the closure of the scheme.

The SLF-MF scheme will remain open until 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.
first published: Apr 30, 2020 01:21 pm

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