Fitch fears more 'gating' in debt schemes if RBI plan doesn't take-off

Banks may look at conserving capital, with asset quality concerns rising amid Coronavirus-induced lockdown

The global rating agency Fitch says under-capitalised banks may steer clear of extending liquidity support to debt mutual funds (MFs) through Reserve Bank of India’s (RBI) window.

This could force more debt schemes to move to suspend redemptions, also known as 'gating', one of the calls taken by Franklin Templeton Mutual Fund.

“The official support measures announced for mutual funds in India may struggle to be effective, as undercapitalised banks are unlikely to be tempted to extend liquidity to the sector without capital relief on the facilities,” the agency said.

The agency pointed out that the success of the