RBI Extends Regulatory Benefits under SLF-MF Scheme to banks deploying their own liquidity to support MFs

Mumbai: The Reserve Bank of India (RBI) has extended the regulatory benefits announced under Special Liquidity Facility for Mutual Funds (SLF-MF) to all banks irrespective of whether they avail funding from the RBI or deploy their own resources under the scheme

“… 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 own resources under the SLF-MF scheme. Banks meeting the liquidity requirements of Mutual Funds by extending loans and undertaking 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” RBI said.

“The bank claiming the regulatory benefits as detailed above would be required to submit a weekly statement containing consolidated information on entity-wise and instrument-wise loans and advances extended or investment made to eligible entities to Financial Markets Operations Department (email) and to Department of Supervision (email) on every Monday till the closure of the scheme” it added.

With a view to ease liquidity pressures on Mutual Funds, the Reserve Bank of India on April 27 had announced a special liquidity facility(SLF) of Rs.50,000 Crore. The liquidity pressures on Mutual Funds have been intensified in the wake of redemption pressures related to the closure of some debt MFs and potential contagious effects.