Recently, the Reserve Bank of India (RBI) announced a Special Liquidity Facility for Mutual Funds (SLF-MF) of Rs 50, 000 crore to bail out mutual funds. Consider the following statements regarding SLF-MF: RBI will conduct Repo Operations, directly extending loans to mutual funds at repo rate. It is a part of Long Term Repo Operations of RBI. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'D'. Can you explain this answer?

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RBI will conduct Repo Operations, directly extending loans to mutual funds at repo rate.

It is a part of Long Term Repo Operations of RBI.

Which of the statements given above is/are correct?

a)
1 only
b)
2 only
c)
Both 1 and 2
d)
Neither 1 nor 2

Correct answer is option 'D'. Can you explain this answer?

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Recently, the Reserve Bank of India (RBI) announced a Special Liquidi...

The Reserve Bank of India (RBI) recently announced a special liquidity window of Rs 50, 000 crore to bail out mutual funds hit by the turmoil in the debt fund segment that led to the closure of six credit risk funds by Franklin Templeton Mutual Fund.

Statement 1 is incorrect. Under the special liquidity facility for mutual funds (SLF-MF), the RBI will conduct repo operations of 90 days tenor at the fixed repo rate. The SLF-MF is on-tap and open-ended, and banks can submit their bids to avail the funding till May 11 or up to utilization of the allocated amount, whichever is earlier. Funds availed under the SLF-MF will be used by banks exclusively for meeting the liquidity requirements of MFs. Hence, RBI will not extend loans directly to mutual funds. Banks can extend loans to mutual funds and undertake the outright purchase of and/or repos against the collateral of investment grade corporate bonds, commercial papers (CPs), debentures and certificates of Deposit (CDs) held by MFs.

Statement 2 is incorrect. The special liquidity facility for mutual funds (SLF-MF), the RBI will conduct repo operations of 90 days tenor and not Long Term Repo Operations.

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Recently, the Reserve Bank of India (RBI) announced a Special Liquidity Facility for Mutual Funds (SLF-MF) of Rs 50, 000 crore to bail out mutual funds. Consider the following statements regarding SLF-MF: RBI will conduct Repo Operations, directly extending loans to mutual funds at repo rate. It is a part of Long Term Repo Operations of RBI. Which of the statements given above is/are correct?a)1 onlyb)2 onlyc)Both 1 and 2d)Neither 1 nor 2Correct answer is option 'D'. Can you explain this answer?

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