MF redemption need gets Rs 20,000 cr | india | Hindustan Times
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MF redemption need gets Rs 20,000 cr

india Updated: Oct 14, 2008 21:06 IST
HT Correspondent
HT Correspondent
Hindustan Times
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The Reserve Bank of India (RBI) on Tuesday offered to provided Rs 20,000 crore of 14-day money for easing funds shortage at mutual funds via the banking system, but there were hardly any takers for the facility.

Only four banks borrowed Rs 3,500 crore from the special facility whereby banks could have borrowed for on-lending to mutual funds.

The facility was aimed at saving mutual funds from having to “fire sell” assets in their liquid debt schemes. The RBI said in its statement that this facility, that was available for use only for today, was meant to enable banks to meet short-term liquidity requirements of mutual funds.

This special facility, for which an auction was held today, was in addition to the normal overnight liquidity facility available for banks.

Immediately after the announcement, Sujoy Das, Head, Fixed Income, Bharti AXA Investment Managers, had said “this facility will help mutual funds to tide over short-term liquidity requirement faced due to increased redemption requests.

The RBI, simultaneously, had relaxed restrictions on lending and buying back of certificates of deposits (CDs) issued by banks for a period of 15 days, only in respect of CDs held by mutual funds. CDs are papers issued by banks against receipt of large deposits of up to one-year, usually at around 100-200 basis points more than the rates prevailing on normal deposits.