The coronavirus has not just impacted the human lives physically but also through economic means. Recently, after Franklin Templeton closed 6 debt mutual funds leaving all investors in a panic, Reserve Bank of India has decided to help the Indian Mutual Funds with a special liquidity facility of Rs. 50, 000 crores.
This funding will not only help in easing up the liquidity pressure of the sector but also in boosting up the confidence of the investors. If analysts are to be believed, this move taken by RBI is surely going to provide a good amount of help to the mutual funds to combat the negative impacts faced by the pandemic.
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10 important things to know about the decision
Here are the 10 important points that can help in understanding the announcement made by the RBI in brief.
- The RBI will be conducting a repo operation for a time period of 90 days at a fixed rate. As per the decision, the banks will be accessing the funds from the repo window of RBI. Though currently the scheme will be active till 11th May, the timeline can be soon reviewed by the Central Bank depending upon the condition of the market.
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- As a result of the announcement, gains were noticed in the financial stocks such as Nifty Bank Index.
- RBI has mentioned that the financial stress is mainly over the mutual funds with the high-risk debt type and the other larger industries will be liquid.
- The announcement mainly was made with respect to the incident that happened with Franklin Templeton. The company has wrapped up 6 of the Indian funds due to the situation created by the coronavirus impact.
- No doubt such an incident of Franklin Templeton created chaos and many of the investors started withdrawing their investments from different mutual funds. This was a devastating situation for many of the fund houses and these fund houses started taking steps so that they can reassure their investors about the investments that they have made.
- Many of the company heads such as Motilal Oswal have assured that there is still enough liquidity in the market so that the investors do not have to worry. On top of this, the announcement of special liquidity funds by RBI has helped in boosting up the confidence of the investors especially after the incident of Franklin Templeton.
- Franklin Templeton is the 9th biggest mutual in India and has an asset worth of higher than Rs. 86,000 crores. The US-based company is there in India for the last two decades and mainly deals in low-rated paper options such as “A” in return for which it offers higher profit to the investors.
- P Chidambaram, the former Finance Minister of India has tweeted welcoming the announcement made by the RBI lately.
- RBI has mentioned that it is keeping a close eye on the economic condition of the market that is experiencing ripples by the impacts of COVID-19. Also, it has mentioned that it is going to take all possible steps that will help in preserving the economic stability of the country. The Indian Government has extended the lockdown for fighting the situation and this condition getting an announcement like this is a great relief for the economic condition of the country.
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- By now, there are more than 29,000 positive cases of coronavirus in India of which more than 900 people are dead. To control the situation of spreading out of the virus, even more strict measures are being taken that are surely hampering the country’s economy. In light of this, apart from the announcement made by RBI, the central bank has taken many other measures such as cutting down on the key interest rates and others for offering comfort to the citizens.
The pandemic has created a mess across the world and different Governments are taking steps to not just combating the situation but also in helping out their economic conditions. India has been praised by many other countries across the world for its quick decisions and clever acts. Extending the lockdown period is one of the major decisions that had helped in controlling the spread of the virus while there is no doubt that this had impacted the economy of the country. Now to combat the economic crash, the announcement by RBI is another big decision worth praising.
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