Mumbai: India’s central bank will open a new credit facility for banks aimed at boosting their lending to mutual funds, which have been hit by a flood of redemptions.
“With a view to easing liquidity pressures on mutual funds, it has been decided to open a special liquidity facility for mutual funds of 500 billion rupees ($6.6 billion),” RBI said in the statement. “The scheme is available from today i.e., April 27, 2020 till May 11, 2020 or up to utilization of the allocated amount, whichever is earlier.”
The South Asian nation’s debt markets have been reeling since the spread of coronavirus prompted authorities to institute the world’s biggest stay-at-home restrictions, prompting risk-averse investors to dump assets and worsening liquidity in some corporate bond trading. Policy makers are concerned that stress in the credit market and mutual funds will translate into higher borrowing costs for companies that depend on the sector for short-term funding.
Also read: RBI needs to open its vault and fill the hole left by Franklin Templeton