New Delhi: The Reserve Bank of India (RBI) on Monday announced a special liquidity facility worth Rs 50,000 crore for mutual funds. The development comes days after Franklin Templeton Mutual Fund decided to close six debt schemes. Also Read - RBI Slaps Penalties on Bank of India, Karnataka Bank For Non-compliance With Certain Norms

“With a view to easing liquidity pressures on MFs, it has been decided to open a special liquidity facility for mutual funds of Rs 50,000 crore. Heightened volatility in capital markets in reaction to COVID-19 has imposed liquidity strains on mutual funds (MFs), which have intensified in the wake of redemption pressures related to closure of some debt MFs and potential contagious effects therefrom,” the RBI said in a statement. Also Read - Coronavirus Recession: India's GDP Likely to Contract 5% in FY21: Crisil

The central bank, however, asserted that stress is confined to the high-risk debt mutual fund segment at this stage. Also Read - Malls Lose Rs 90,000 Crore in 2 Months, SCAI Seeks Adequate Relief

Furthermore, the RBI stressed that it remains vigilant and will take whatever steps are necessary to mitigate the economic impact of COVID-19 and preserve financial stability.

The central bank’s liquidity facility for mutual funds will be effective from today till May 11, 2020 or up to utilisation of the allocated amount, whichever is earlier.