The Reserve Bank of India on April 27, 2020 announced a Special Liquidity Facility for Mutual Funds (SLF-MF) of 50,000 crore rupees with a view to easing liquidity pressures on Mutual Funds.
Under the Special Liquidity Facility for Mutual Funds (SLF-MF), the RBI shall conduct repo operations of 90 days tenor at the fixed repo rate.
The SLF-MF is on-tap and open-ended and banks can submit their bids to avail funding on any day from Monday to Friday (excluding holidays).
The scheme is available till 11th of May or up to utilization of the allocated amount, whichever is earlier.
Background
RBI announcement came in the backdrop of Franklin Templeton Fund’s six debt schemes withdrawal. Mutual fund investors had received a jolt in April 2020 when Franklin Templeton fund house halted withdrawals from six debt mutual fund mutual schemes with large exposures to higher-yielding, lower-rated credit securities, citing lack of liquidity amid the coronavirus pandemic.
These six funds are-Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund and Franklin India Income Opportunities Fund.
As coronavirus crisis squeezed liquidity from the system, corporates and HNIs who were major investors in these funds had to aggressively redeem debt mutual funds to compensate for their cash shortage.
