Moving swiftly to help the mutual fund industry, the Reserve Bank on Tuesday sought applications from the banks and primary dealers by afternoon for Rs 20,000 crore short-term loan facility announced in the morning.
"The eligible banks and primary dealers may submit their applications electronically through National Negotiated Dealing system (NDS) between 2.30pm to 3.15pm today," RBI said in a notification.
The RBI will conduct a special fixed rate repo auction at 9 per cent per annum against eligible securities for Rs 20,000 crore on Tuesday, it said.
The allocations to the bidders will be made on pro-rata basis.
The facility is aimed at enabling banks to meet liquidity requirement of the mutual fund industry which is facing redemption pressure.
The loan will have to be returned to the RBI on October 29, it said.
The RBI further said that this facility would be in addition to repo/reverse repo auctions conducted Liquidity Adjustment Facility (LAF) and Second Liquidity Adjustment Facility (SLAF).
Finance Minister P Chidambaram earlier in a day welcomed the decision of the RBI and said that the move follows the liquidity stress being faced by the mutual fund industry.
He said, the special facility will enable the bank to the liquidity requirements of the cash-strapped asset management industry.