RBI extends regulatory benefits under SLF-MF scheme to all banks

The Reserve Bank of India
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The Reserve Bank of India
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The Reserve Bank of India (RBI) today extended regulatory benefits to all banks including those deploying their resources to extend liquidity support to the mutual funds under the Special Liquidity Facility for Mutual Funds SLF-MF scheme.

The Reserve Bank of India (RBI) today extended regulatory benefits to all banks including those deploying their resources to extend liquidity support to the mutual funds under the Special Liquidity Facility for Mutual Funds SLF-MF scheme.

RBI, earlier on April 27, 2020, announced Rs 50,000-crore special liquidity facility for mutual funds (SLF-MF) scheme to bailout the mutual funds facing redemption pressure.

The scheme was announced in the backdrop of Franklin Templeton Mutual Fund, which earlier decided to shut several schemes. Franklin Templeton Mutual Fund has been operating in India for 25 years and it decided to shut down 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.

RBI in a release said, "Based on requests received from banks, it has now been decided that the regulatory benefits announced under the SLF-MF scheme will be extended to all banks, irrespective of whether they avail funding from the Reserve Bank or deploy their resources under the above-mentioned scheme."

The release further said, "Banks meeting the liquidity requirements of MFs by (1) extending loans, and (2) undertaking the outright purchase of and/or repos against the collateral of investment-grade corporate bonds, commercial paper (CPs), debentures and certificates of deposit (CDs) held by MFs will be eligible to claim all the regulatory benefits available under SLF-MF scheme without the need to avail back to back funding from the Reserve Bank under the SLF-MF."

The banks who will claim the regulatory benefits will have to submit a weekly statement containing consolidated information on entity-wise and instrument-wise loans. The statement should also contain details like advances extended or investment made to eligible entities to Financial Markets Operations Department (email) and Department of Supervision (email) on every Monday till the closure of the scheme.

Last time, RBI had opened a special borrowing window of Rs 25,000 crore for banks to help meet the cash requirements of mutual funds in July 2013. Similar additional liquidity support was offered exclusively to the mutual fund industry by RBI in October 2008 after the collapse of Lehman Brothers.

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