Net redemptions in credit risk funds have fallen after the RBI offered the Rs 50,000-crore special liquidity facility to mutual funds. Credit risk funds are debt mutual funds where 65 per cent of the corpus are invested in AA or below rated papers.
Industry body Amfi on Sunday said net redemptions under the credit risk funds are tapering off substantially, post the April 27 announcement of the special liquidity measure. The schemes constitute less than five per cent of the total debt mutual fund assets under management (AUM).
Net redemptions, which are total redemptions subtracted by mobilisation, rose to Rs 4,294.36 crore on April 27 from Rs 2,949.49 crore on April 24.
Redemptions then fell to 1,847.29 crore on April 28, Rs 1,251.17 crore on April 29 and Rs 793.99 crore on April 30.
Amfi said all fund houses have met the redemptions in the normal course of business.
The fall in redemptions by 81.5 per cent on April 30 from April 27 was because of the measures announced by the RBI. “Declining trend in net redemptions from credit risk funds is a welcome development, indicative of investors comfort from RBI’s special liquidity facility available to the MF industry. Amfi will continue to work with regulators for the normal functioning of the market,” Nilesh Shah, chairman, Amfi (Association of Mutual Funds in India), said.
Investors of debt schemes felt certain apprehensions after Franklin Templeton decided to wind up six debt schemes because of redemption pressure and lack of liquidity in the bond markets of some of its investments because of the Covid-19 pandemic.
This had prompted the RBI to come out with a special liquidity window to help the mutual fund sector. In 2008 and 2013, too, the central bank had announced such a window.
Called the special liquidity facility for mutual funds (SLF-MF), the RBI said that it will conduct repo operations of 90 days tenor at the fixed repo rate. The SLF-MF is on-tap and banks can submit their bids to avail funding on any day from Monday to Friday. The scheme will be available till May 11.
To incentivise banks to finance the mutual fund sector, the RBI subsequently said that the regulatory benefits announced under the SLF-MF scheme will be extended to all banks.
