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Abundant liquidity created by RBI by way of Open Market Operations or OMOs have helped the borrowing prices in monetary markets to drop to their lowest in a decade. The plentiful liquidity has supported mutual funds in an important method. RBI Governor in his bi-monthly financial coverage overview speech mentioned that the belongings manged by the debt mutual funds have improved since the Franklin Templeton episode as a result of plentiful liquidity available 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,” mentioned the RBI Governor Shaktikanta Das in his speech.
Franklin Templeton had shut down its six debt schemes on April 23, following extreme illiquidity in underlying bonds and redemption pressures. The six schemes, particularly, 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 belongings price ₹26,000 crore then.
The Governor famous that transmission of the speed cuts by the MPC wouldn’t have been attainable to the extent achieved thus far with out creating comfy liquidity situations. The overriding goal was to forestall monetary markets from freezing up.
The RBI Governor added that the decrease borrowing prices have led to file major issuance of company bonds of ₹2.09 lakh crore within the first quarter of (April-June) 2020-21. In specific, market financing situations for NBFCs, which had develop into difficult, have largely stabilised within the wake of focused coverage measures. For AA+ rated 3-year NBFC bonds, spreads over comparable tenor G-secs have narrowed from 360 foundation factors on March 26 to 139 foundation factors on July 31, 2020.
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