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Business News/ Mutual Funds / News/  Liquidity measures stabilised mutual funds since Franklin Templeton episode: RBI Chief
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Liquidity measures stabilised mutual funds since Franklin Templeton episode: RBI Chief

Franklin Templeton had shut down its six debt schemes on April 23, following severe illiquidity in underlying bonds and redemption pressures.

RBI Governor Shaktikanta DasPremium
RBI Governor Shaktikanta Das

Abundant liquidity created by RBI through Open Market Operations or OMOs have helped the borrowing costs in financial markets to drop to their lowest in a decade. The abundant liquidity has supported mutual funds in a great manner. RBI Governor in his bi-monthly monetary policy review speech said that the assets manged by the debt mutual funds have improved since the Franklin Templeton episode due to the abundant liquidity in the market.

"Mutual Funds have stabilised since the Franklin Templeton episode. Assets under management of Debt MFs, which fell to 12.20 lakh crore as on April 29, 2020, recovered and improved to 13.89 lakh crore as on July 31, 2020," said the RBI Governor Shaktikanta Das in his speech.

Franklin Templeton had shut down its six debt schemes on April 23, following severe illiquidity in underlying bonds and redemption pressures. The six schemes, namely, Franklin India Low Duration Fund, Franklin India Dynamic Accrual Fund, Franklin India Credit Risk Fund, Franklin India Short Term Income Plan, Franklin India Ultra Short Bond Fund and Franklin India Income Opportunities Fund cumulatively managed assets worth 26,000 crore then.

The Governor noted that transmission of the rate cuts by the MPC would not have been possible to the extent achieved so far without creating comfortable liquidity conditions. The overriding objective was to prevent financial markets from freezing up.

The RBI Governor added that the lower borrowing costs have led to record primary issuance of corporate bonds of 2.09 lakh crore in the first quarter of (April-June) 2020-21. In particular, market financing conditions for NBFCs, which had become challenging, have largely stabilised in the wake of targeted policy measures. For AA+ rated 3-year NBFC bonds, spreads over similar tenor G-secs have narrowed from 360 basis points on March 26 to 139 basis points on July 31, 2020.

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Published: 06 Aug 2020, 01:30 PM IST
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