RBI extends benefits under special liquidity facility for MFs to all banks

Decision taken based on requests received from banks; exposures under this facility will not be reckoned under large exposure framework or for determining priority sector targets

Banks that meet the liquidity needs of mutual funds without using RBI’s special liquidity facility for MFs (SLE-MFs), will also get the regulatory benefits available to those that are tapping this special window.

The decision was taken based on requests received from banks, RBI said in a statement. Banks using their own funds to meet liquidity needs of MFs by extending loans, and purchasing investment-grade corporate bonds, commercial paper (CPs), debentures and certificates of deposit (CDs) held by MFs can claim the regulatory benefits available under SLF-MF scheme.

On April 27, RBI started a special liquidity facility of Rs 50,000 crore to ease the liquidity strain on mutual funds, which had intensified due to redemption pressures sparked by the closure of some debt schemes.

RBI had granted certain regulatory benefits to those using this window. The liquidity availed under this window could be classified as held-to-maturity (HTM) even beyond 25 per cent of the total investment permitted in the HTM portfolio. 

Also, 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 determining priority sector targets/sub-targets. Support extended to MFs under the SLF-MF shall be exempted from banks’ capital market exposure limits.