RBI to boost liquidity for mutual funds

The RBI has decided to inject Rs 20,000 crore through short-term lending route to help the mutual funds meet their liquidity needs and overcome redemption pressure.

The Reserve Bank on Tuesday decided to inject Rs 20,000 crore through short-term lending route to help the mutual funds meet their liquidity needs and overcome redemption pressure.

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"RBI has decided to conduct a special 14-day repo (repurchase of securities) at nine per cent per annum for Rs 20,000 crore on Monday with a view to enabling banks to meet the liquidity requirement of mutual funds," the central bank said in a release.

The decision will help the mutual fund industry to meet redemption pressure following the credit crisis in the financial sector.

Meanwhile, Finance Minister P Chidambaram while welcoming the decision by RBI said it was taken in view of the liquidity stress being faced by some mutual funds.