Glad RBI took note of concerns: Chidambaram after central bank pumps Rs 50,000 crore for mutual funds
P Chidambaram comment came soon after RBI announced a special liquidity facility worth Rs 50,000 crore for mutual funds.Updated: Apr 27, 2020 11:52 IST
Former finance minister P Chidambaram, who had urged for a prompt action by the government after Franklin Templeton closed six of its debt schemes in India, said on Monday the Reserve Bank of India’s (RBI’s) Rs 50,000 crore boost for mutual funds was a welcome step.
The Congress leaders’ comment came soon after RBI announced a special liquidity facility worth Rs 50,000 crore for mutual funds, in a bid to ease liquidity pressures in the segment and lift investors’ confidence days after Franklin Templeton wound up its India funds.
The central bank cited heightened volatility in capital markets in reaction to the coronavirus pandemic, which has imposed liquidity strains on mutual funds.
“I welcome the RBI’s announcement of a Rs 50,000 crore special liquidity facility for Mutual Funds. I am glad that RBI has taken note of the concerns expressed two days ago and requesting prompt action,” Chidambaram tweeted.
Franklin Templeton, one of the first global financial firms to launch asset management operations in India more than two decades ago, had said on Thursday it would close the yield-oriented, managed credit funds.
The senior Congress leader had said on April 25 it was a matter of grave concern to investors, the mutual fund industry and the financial markets.
Chidambaram had also pointed out how the United Progressive Alliance (UPA) government had handled a similar situation during the global financial crisis in 2008 when mutual funds faced liquidity stress.
“Government immediately consulted RBI, SEBI, IBA, AMFI and others. An urgent meeting of the FSDC was convened and a solution was found by the end of the day. On the next morning, officers of RBI and SEBI met at 8 am, and RBI announced a 14-day special repo facility and allowed an additional 0.5 per cent of NDTL. The situation was resolved,” the Congress leader had said in a statement.
Franklin Templeton had said in a statement that the decision to close the schemes “in order to protect value for investors via a managed sale of the portfolio.”
The decision was limited to funds which have “material direct exposure to the higher-yielding, lower-rated credit securities in India that have been most impacted by the ongoing liquidity crisis in the market,” the statement said.