Due to Franklin Templeton crisis issue in debt funds, all mutual funds now facing liquidity crunch issue, huge number of investors redeems their positions in mutual funds, because of this liquidity issue arises with all mutual funds.
To overcome this issue RBI announced today (Monday, 27-Apr-20) Rs 50,000 crore liquidity support to mutual funds, under the special liquidity facility scheme RBI will conduct repo operations of 90 days tenor at the fixed repo rate.
That means RBI will provide liquidity to mutual funds through banks, banks will provide this liquidity against any colatral or good quality bonds which mutual funds holding.
The facility will be on-tap and open-ended, and banks can submit their bids to avail funding on any day from Monday to Friday, RBI said. Funds availed under the scheme can be used by banks exclusively for meeting the liquidity requirements of mutual funds
Central bank taken this step after taking Franklin Templeton’s decision to closes six debt funds and put the redemptions on hold indefinitely.
Nimesh Shah, MD and CEO of ICICI Prudential MF appreciated RBI’s decision and said that the confidence among investors will increase due to this decision.
In a release, the RBI said: “Heightened volatility in capital markets in reaction to Covid 19 has imposed liquidity strains on mutual funds which have intensified in the wake of redemption pressures related to closure of some debt MFs and potential contagious effects there from”.
Now Question arises: What should Investers of Mutual Fund in Franklin Templeton need to do?
As RBI role came in picture and they provided 50000 crore relief fund to support mutual fund industries, in this situation you should avoid this MF and invest only in top rated mutual funds which having large AUM base and good credibility in market.
Suggesting below some top rated mutual funds list to invest.
- SBI Mutual Fund
- Aditya Birla Mutual Fund
- Axis Mutual Fund
- HDFC Mutual Fund
- Reliance Mutual Fund
- ICICI mutual fund
- TATA Mutual Fund
- DSP Mutual Fund
- Nippon India Mutual Fund
- Mirae Asset Mutual Fund