RBI by its latest announcement vide dated 27 April, 2020 releases 50000crore Special Liquidity Facility for Mutual Funds with a view to easing liquidity pressure on Mutual Fund due to the COVID-19 pandemic. Under this Special Liquidity Facility for Mutual Funds RBI will conduct repo operation of 90 days tenure at fixed repo rate.
Funds availed under the SLF-MF shall be exclusively used by banks for meeting the liquidity requirements of Mutual Funds by:
- Extending loans,
- Undertaking outright purchase of and/or repos against the collateral of investment grade corporate bonds, commercial papers (CPs), debentures and certificates of Deposit (CDs) held by Mutual Funds.
Special repo window will be available to all LAF eligible banks and can be availed only for non lending to Mutual Funds.
Liquidity support availed under the would be eligible to be classified as held to maturity (HTM) even in excess of 25% of total investment permitted to be included in the HTM portfolio.
Exposures under this facility will not be reckoned under the Large Exposure Framework (LEF). The face value of securities acquired under the SLF-MF and kept in the HTM category will not be reckoned for computation of adjusted non-food bank credit (ANBC) for the purpose of determining priority sector targets/sub-targets. Support extended to MFs under the SLF-MF shall be exempted from banks’ capital market exposure limits.
