Mumbai: The measures adopted by RBI have worked well for the mutual fund industry that has seen an improvement in the liquidity situation as well as a rise in inflows this month, a senior mutual fund industry official said on Wednesday.
“There has been an improvement in liquidity. There is (also) an increased inflow into mutual funds,” Association of Mutual Funds in India (Amfi) chairman AP Kurian told reporters on the sidelines of a conference here.
The recent measures taken by the RBI to ease the liquidity crunch in the system have helped the mutual fund industry, he said. “In October, the mutual fund industry faced redemption pressures,” Mr Kurian said, adding, that the special repo window provided by RBI, has improved the situation now.
The apex bank has cut its cash reserve ratio (CRR) by 3.5% and repo rate by 1.5% since October, thereby considerably easing liquidity pressure on the system. The concerted efforts by the authorities have helped in bringing down interest rates 7.5% from 9%.
“Consequently, funds are now able to borrow at lower interest rates. Initially, funds were borrowing at 14-18% but now due to intervention by the government, RBI and the Indian Banks’ Association, most public sector banks are ready to lend money to mutual funds,” Mr Kurian said.
Besides, they have also reduced interest rates to 10.5-11%, which he said “is a very welcome development.”
The total gross borrowing of mutual funds after the RBI opened special windows to ease the liquidity pressure was around Rs 22,000 crore and most of the funds have repaid, Kurian said.
“At present, only a couple of funds are resorting to borrowing while the rest of the funds are able to manage by selling securities combined with increased inflow into the funds,” he said.
The Securities and Exchange Board of India (Sebi) was looking at what happened in the past two to three months and is also keeping an eye on the current situation.
Amfi was working closely with Sebi to prevent the recurrence of market disturbances as witnessed in the recent past, he said.-PTI
