Wipro Net Goes Up 79%

In the credit policy last week, the Reserve Bank of India (RBI) allowed scheduled commercial banks to offer the cheque-writing facility to gilt funds and to those liquid income schemes of mutual funds that predominantly invest in money market instruments (that is, funds with not less than 80 per cent of their corpus).

The cheque-writing facility was first made available to money market mutual funds (MMMF) in the credit policy of April 1999. The extension of the facility to gilt funds and liquid income schemes creates a level playing field among these three short-term invest-ment options.

The new facility would not only address some of the liquidity concerns of retail investors but will also result in a manifold increase in the number of option in terms of schemes available. Compared with only three MMMFs (of which only one currently offers the cheque-writing facility) eligible earlier, the investor can now choose from more than 15 gilt funds and liquidity funds that have become eligible to offer this facility.

 

But due to the competitive pressures, more schemes will soon offer this facility. In fact, Dundee Mutual Fund is already holding talks with a private sector bank to offer this facility for its Gilt Fund and Liquidity Fund as soon as possible.

The biggest beneficiaries could be individuals with a decent balance in their savings account. So far, such individuals had to be content with a 4.5 per cent interest offered by a savings account compared with an eight to ten per cent return offered by some of the short- term debt funds.

Small investors did not consider gilts and other such schemes because they were reluctant to forego the liquidity advantage that a savings banks offers. Which is why MMMFs were mostly used by treasury managers and high net worth individuals to park their idle funds. The cheque facility, when introduced by these funds, would bridge the gap between a savings bank account and these mutual funds.

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