Banks withdraw Rs 15,000 cr from MFs

Banks withdrew Rs 14,814 crore from mutual funds (MFs) during the fortnight ended June 18, partly due to demand from telecom companies to pay for broadband wireless access licences.

According to latest data by the Reserve Bank of India (RBI), banks’ investment in MFs stood at Rs 35,749 crore at the end of June 18, as against Rs 50,563 crore at the end of the previous fortnight.

“Availability of funds has come down in June. Call rates have moved up in a big way and as a result, banks had to withdraw money from MFs. The withdrawals are expected to increase in the next 15 days, since it is the end of the quarter. After that, the liquidity situation will determine whether there is an inflow or an outflow into MFs,” said R V S Sridhar, senior vice-president of treasury, at Axis Bank.

Another reason is low deposit mobilisation during the fortnight, when deposits fell Rs 23,761 crore. Also, on a year-on-year basis, they grew 13.92 per cent against RBI’s projection of 18 per cent for 2010-11.

In addition, banks have withdrawn funds from government bonds to meet the loan demand. Bank investments in government bonds dipped Rs 22,450 crore during the fortnight.