SPECIAL LIQUIDITY FACILITY FOR MUTUAL FUNDS (SLF-MF)

April 28, 2020

RBI has been decided to open a special liquidity facility for mutual funds of ₹ 50,000 crore to bail out Mutual Funds (MFs) hit by the turmoil in the debt fund segment that led to the closure of six credit risk funds by Franklin Templeton Mutual Fund.

About:

Under the SLF-MF, the RBI shall conduct repo operations of 90 days tenor at the fixed repo rate.
The SLF-MF is on-tap and open-ended, and banks can submit their bids to avail funding on any day from Monday to Friday (excluding holidays).
The scheme is available from April 27, 2020 till May 11, 2020 or up to utilization of the allocated amount, whichever is earlier.
Funds availed under the SLF-MF shall be used by banks exclusively for meeting the liquidity requirements of MFs by
- extending loans, and
- undertaking outright purchase of and/or repos against the collateral of investment grade corporate bonds, commercial papers (CPs), debentures and certificates of Deposit (CDs) held by MFs.
Liquidity support availed under the SLF-MF would be eligible to be classified as held to maturity (HTM) even in excess of 25 % of total investment permitted to be included in the HTM portfolio.
Exposures under this facility will not be reckoned under the Large Exposure Framework (LEF).